Hiring International Contractors: Form W-8BEN Demystified

The decision point

When you pay a person for services, the IRS cares about two things:

1. Is the person a US person or not?
2. If not, was the service performed in the US or outside?

US persons → 1099-NEC (for $600+)

Non-US persons, work performed outside US → Usually no US reporting

Non-US persons, work performed inside US → Withholding and 1042-S

W-8BEN is how the contractor certifies status #1 (non-US person).

What Form W-8BEN does

• Certifies the recipient is a non-US person (not a US citizen, green card holder, or resident alien)
• Claims treaty benefits if any apply (often reduces withholding)
• Provides the recipient's tax ID (foreign country tax ID, not US SSN/EIN)
• Stays valid for 3 years from the end of the year it was signed

When you need a W-8BEN

Before paying any non-US person — ideally before the first payment. The form is:

• For individuals (non-US) — Form W-8BEN
• For entities (non-US corporations, LLCs, partnerships) — Form W-8BEN-E

You collect and keep the form. You don't send it to the IRS unless requested. The contractor signs and dates it.

When you do NOT need to file 1099-NEC for them

You don't issue a 1099-NEC if:

• Contractor signed W-8BEN, AND
• Services were performed outside the US (the contractor wasn't physically in the US when doing the work)

Most remote workers overseas fit this exactly. No 1099 required. The contractor reports income in their home country.

When you DO owe withholding

The 30% backup withholding trap

If you pay a foreign person for services and they haven't given you a W-8BEN, the default IRS position is:

1. Withhold 30%
2. File Form 1042-S
3. Pay withheld amount to IRS

This happens whether or not the income is US-source under the strict letter of the rules. The W-8BEN is your safe harbor.

Practically: get every non-US contractor to fill out a W-8BEN before their first invoice. Don't let this slide.

Collecting the form

The W-8BEN is a 1-page form. You send them a copy (PDF or digital form), they complete and return. Keep the original signed version.

Tools that automate W-8BEN collection:

• Deel — contractor management platform
• Remote — similar
• Wise (for payments) — can request form during payee setup
• PayPal — requests tax forms on recipient side
• DIY — email them the IRS PDF; they sign and return

Treaty benefits

Some tax treaties reduce withholding on certain income types. Example: under the US-UK treaty, royalties might be withheld at 0% instead of 30%. The contractor claims the treaty benefit on W-8BEN Line 10.

For most service payments to non-US contractors performing work outside the US, treaty benefits are irrelevant — there's no US tax to begin with, so nothing to reduce.

What to do if you already paid without a W-8BEN

1. Request W-8BEN retroactively
2. If contractor signs and dates it, you have the safe harbor going forward
3. For past payments: if services were performed outside US, documentation of that fact (invoices showing location, communication records) is your defense
4. Don't file 1099-NEC for non-US contractors — the SSN/EIN field won't match IRS records and creates a worse problem

Solo LLC owner's workflow

1. Contractor agreement specifies where work will be performed
2. Before first payment: contractor fills out W-8BEN (if non-US) or W-9 (if US)
3. You keep the form in your files
4. Pay via Wise, PayPal, or bank transfer
5. Track payments in your books as Line 11 (Contract labor) on Schedule C
6. At year-end, issue 1099-NEC only to US contractors with W-9 on file
7. Non-US contractors with W-8BEN and overseas work: no 1099, no 1042-S, nothing further

Does the contractor owe US tax?

Usually no. If the work was performed outside the US and they're a non-resident alien for US tax purposes, the income is not US-source and not subject to US tax. They report and pay tax in their home country.

Exception: if the contractor is in the US working on a visa with tax obligations, they may owe US tax. That's their problem, not yours (you just collect the W-8BEN and file 1042-S as required).