You Make the Call - Dec. 12, 2024

Question: Edgar runs a small technology company that uses the services of two foreign contractors; one lives in Guatemala and the other in Costa Rica. They will be paid $5,500 and $8,500 respectively. Edgar needs to know if he has a compliance obligation to issue them a Form 1099-NEC, Nonemployee Compensation?

Answer: No, Form 1099-NEC is not required to be issued to foreign contractors. First, the employer verifies the contractors are not U.S. citizens working outside the country. The foreign contractors will sign Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals). By completing Part I and signing Form W-8BEN, the foreign contractors are certifying they are not U.S. persons. The foreign contractors do not need ITINs. Form 1099-NEC does not need to be filed [Reg.§1.6041-4(a)]. The Form W-8BEN is not filed with the IRS, however, the employer must keep it in the files just in the event of an audit.