1099s and Update on Paying Foreign Persons for Services: 1099, 1042S or Nothing?

published January, 2015

Please work on your 1099s, if you need to prepare them for your business. Let me know if you need help, I’m preparing a limited number of 1099s and I have some form stock in house, or you can order the forms from the IRS (don’t forget the Form 1096 “Transmittal” to use as a cover sheet). You can file them on-line, but this is not yet a free service.

I went to a class in December and was able to ask an IRS expert specifically about reporting requirements for paying Foreign Persons for Services.

We all know if we pay an individual for services who is a US person or US resident, with some exceptions, they should probably get a Form 1099. These people have an SSN, a nine-digit number issued by the Social Security Administration.

If you pay someone for work DONE in the US who is a “non resident”—which means they are not a US citizen nor a resident alien, they should complete Form W-8BEN and you’ll issue them a Form 1042S. The question about who is a “Resident Alien” for purposes of this test, is complicated. These people have to get an ITIN, a nine digit number issued by the IRS which begins with the number 9, and has a range of 70-88 in the fourth and fifth digit.

If you pay a foreign person, who never comes to the US, does not do the work in the US, and doesn’t plan to come to the US, they get nothing: no 1099 and no 1042S. Keep copies of cancelled checks and an invoice to prove payment, in the event of audit.

Thanks Carlos!