International contractor (IC) tax compliance can be confusing, but as long as you're clear on a few key facts then we can help simplify it for you.
The IC's residency status and work location are typically the most important factors.
- US person, work performed outside the US
- Non-US person, work performed outside the US
- Non-US person, work performed within the US
Not sure how to categorize a contractor's status as a US person? Check out the IRS guidelines here.
Typically, the way you pay and file for a contractor who is a US person in the same way you would if they were working within the US. See our Form 1099 article & Form W-9 article for more information.
If your IC is both a non-US person AND working outside of the country here's how to proceed.
Instruct your IC to fill out a Form W-8BEN. This is like a Form Form W-9 for international contractors. Make sure your IC sends this form back to you for your records so you can stay compliant in case of an audit. This form does not need to be filed with the IRS.
Additionally, ensure that the IC's payment transactions are correctly categorized. If the IC payments stay on the books as regular contractor payments, you will be expected to produce a Form 1099 for the IC come tax season.
You can find Form W-8BEN and its instructions here: https://www.irs.gov/pub/irs-pdf/fw8ben.pdf.
If your IC is working domestically they will need a visa and a social security number to receive US payroll. Assuming they have these, they can be on-boarded to payroll and paid the same as you would any other contractor within the US. See our Form 1099 article & Form W-9 article for more information.
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