When working with non-US residents or foreign contractors, businesses often wonder whether they need to issue Form 1099-NEC. The general rule: a 1099-NEC is not required if the work is performed entirely outside of the United States. However, if the services are completed within the U.S., special tax withholding and reporting rules apply.
1. No 1099 Required for Work Done Outside the U.S.
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If a foreign contractor performs services outside the U.S., you do not issue a 1099-NEC.
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Instead, businesses should collect IRS Form W-8BEN (or W-8BEN-E for foreign entities) to verify nonresident status.
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These forms confirm that the worker is a non-U.S. person and exempt from 1099 reporting.
👉 Related guide: Form W-8BEN: What Businesses Need to Know.
2. Work Performed in the U.S. Requires Tax Withholding
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If a nonresident contractor provides services inside the United States, the business must withhold 30% tax, unless reduced by a tax treaty.
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Payments must be reported on Form 1042-S and summarized annually on Form 1042.
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Failure to withhold or report properly can result in penalties for the payer.
👉 Learn more: IRS Form 1042-S Filing Guide.
3. Key Takeaways for Businesses
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✅ Always collect Form W-8BEN from foreign contractors to verify nonresident status.
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✅ No 1099-NEC is required if the work is completed outside the United States.
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✅ Withholding applies when services are performed inside the U.S., reported through Forms 1042-S and 1042.
👉 Explore more compliance resources: 1099 Filing Software.