Placeholder

Estimated reading time: 4 mins

The Employer’s Guide to Handling Tax Forms for US vs. International Contractors

Everything you need to know to keep your contractor payments IRS-compliant.

Image of laptop surrounded by contractor tax forms. Background is purple.

Plane Team

Summary: This guide provides a comprehensive overview of tax forms for businesses hiring both U.S.-based and international contractors. It explains how to determine a contractor’s tax residency status and which forms — specifically, the W-9, 1099-NEC, W-8BEN, and W-8BEN-E — are required to remain compliant with the IRS. The article clarifies when businesses must report payments, when tax withholding applies, and how to avoid common pitfalls. It also outlines best practices for collecting and managing tax forms to help ensure smooth, penalty-free contractor payments.Hiring international contractors offers a buffet of benefits, but before you start paying your cross-border contractors, you need to make sure your tax forms are in order. Failing to collect the right forms can lead to IRS penalties, backup withholding of 24–30% on payments, and unnecessary headaches. Below, we break down which forms apply to which contractors, so you can stay on the IRS’s good side.

Understanding tax residency: Who counts as a US person for tax purposes?

Before diving into tax forms, you need to determine whether your contractor qualifies as a “US person” for tax purposes. Here’s the breakdown:
  • US persons include US citizens, green card holders, and resident aliens. The term also encompasses members of domestic partnerships and domestic corporations in the US.
  • Non-US persons are anyone who doesn’t fit the above criteria, including foreign individuals and entities.
This means they’ll need different tax forms, and you may not have to report their payments to the IRS at all — depending on where the work is performed.Why does this matter? Because tax residency determines which forms you need and whether you’re required to withhold taxes from payments. You can dive deeper into the official IRS classification rules here.

Tax forms for US-based contractors: W-9 and 1099-NEC

If you’re hiring US-based contractors, you need to collect the right tax forms to ensure compliance and avoid potential penalties. The IRS requires businesses to report payments to independent contractors, which means knowing when to use a W-9 and when to file a 1099-NEC. Here’s what you need to know:

W-9: The go-to form for US contractors

If your contractor is a US person, they need to fill out Form W-9. This form provides their taxpayer identification number (TIN) and certifies their tax status.
  • Who needs a W-9? US citizens, green card holders, and resident aliens
  • Why? So you can properly report their payments to the IRS.
  • Pro tip: Plane automatically collects your W-9 forms, and we ask contractors to complete them each year to make sure they’re up to date. See how it works with Plane.

1099-NEC: Reporting payments to US contractors

If you pay a US contractor at least $600 in a tax year, you need to file Form 1099-NEC to report their income to the IRS. Plane makes this easy by handling 1099-NEC filings for employers. Learn more.
  • Who needs a 1099-NEC? US contractors who earn $600 or more. (See below for when an international contractor would need one, too.)
Before you file, double-check that you’ve correctly classified your contractors and reported payments accurately to avoid penalties. The IRS has strict guidelines, so it’s worth reviewing their official documentation to stay compliant.

Do you need to file a 1099-NEC for international contractors?

In most cases, you do not need to file a 1099-NEC for foreign contractors, provided they submit a valid W-8BEN or W-8BEN-E (more on those forms below) and perform all their work outside the US.However, if a foreign contractor works inside the US and earns at least $600, you do need to file a 1099-NEC for them.So if an international contractor doesn’t do any work in the US, then you don’t need a 1099-NEC. Read on to learn more about the tax forms you will need to file for them.

Tax forms for international contractors: W-8BEN and W-8BEN-E

If you're hiring international contractors, you need the right tax forms. US tax laws require businesses to verify a contractor’s foreign status and determine whether payments are subject to withholding. The W-8BEN and W-8BEN-E forms help document this, ensuring that contractors aren’t mistakenly taxed like US workers. Here’s what to know about them:

W-8BEN: The must-have for foreign contractors

If your contractor is not a US person, they should complete Form W-8BEN (for individuals) or W-8BEN-E (for foreign entities). These forms certify that they are not subject to US tax withholding unless they perform work inside the US. Just like we do for W-9s, Plane also automatically collects W-8 forms from contractors, which are submitted to the payer (your company) and not the IRS. 
  • Who needs a W-8BEN? Non-US individuals working outside the US
  • Who needs a W-8BEN-E? Foreign businesses working outside the US
  • Why? To confirm their foreign tax status and avoid unnecessary tax withholding
Important: If an international contractor performs work inside the US, they may be subject to 30% withholding unless they claim a tax treaty benefit. Learn more about W-8 forms from the IRS.

Best practices for tax compliance

Staying compliant with tax regulations doesn’t have to be a pain. By following best practices, you can ensure smooth contractor payments and avoid unnecessary issues with the IRS. Here’s what to keep in mind:
  • Always collect tax forms before issuing payments. Request W-9 forms from US contractors and W-8BEN forms from international contractors upfront.
  • Use the correct forms for each contractor. US contractors need a W-9, while non-US contractors require a W-8BEN.
  • Only file 1099-NEC when necessary. A 1099-NEC is required for US contractors earning $600 or more but generally not for foreign contractors unless they completed work in the US.
  • Check applicable tax treaties. Some foreign contractors may be eligible for reduced withholding rates under a tax treaty — be sure to verify their status with the IRS database.
Understanding tax treaties can help reduce withholding tax rates for certain contractors, depending on their country of residence. Learn more about tax treaties at the IRS website, and be sure to stay on top of them so you don’t miss out on potential tax savings.

Final tips for compliance and record-keeping

Hiring internationally is easier than ever — just make sure your tax forms are squared away.
  • Request and store tax forms securely: Plane collects W-8 and W-9 forms automatically.
  • Review tax forms annually: W-8BEN forms expire every three years.
  • Stay informed: IRS rules change, so check official guidance periodically.
With Plane, you can collect W-8 and W-9 forms, file 1099-NEC forms, and pay contractors seamlessly. Learn all about how Plane simplifies contractor payments.

Payroll & HR are easy when you partner with Plane.

Is your US-based company looking for a modern payroll and HR platform? Plane takes care of payroll, benefits, and compliance for your contractors and employees in 100+ countries, including the US. Check out our platform with a 30-minute demo walkthrough.

Schedule a demo

Related articles

From startups to beyond, US companies of all sizes use Plane for global payroll, benefits and compliance.

All articles

Want industry news and product updates?Sign up for our newsletter.