Question: Edgar runs a small technology company that uses the services of two foreign contractors. One lives in Guatemala and the other one lives in Costa Rica. They will be paid $5,500 and $8,500 respectively. Edgar needs to know if he has any obligation and compliance 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 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 in the event of an audit.