One question that often comes up is how a domestic U.S. business should treat payments to a foreign individual for services performed outside the U.S.  Is a Form 1099 required?  Is withholding required?


As long as the foreign individual is not a U.S. person and the services are wholly performed outside the U.S., then no Form 1099 is required and no withholding is required.


However, to assist all account holders to easily report their taxes, regardless of their location in the world we provide them all with a 1099-K. The data on this form can be used for filing taxes in their country. They can also download all of their account transactions for more details such as where payments came from.


Not a U.S. Person


So, how do you “know” that the foreign individual is not a U.S. person?  If the contractor is an individual, perhaps he or she is a U.S. citizen living outside the U.S.?  While you may be able to rely on certain presumptions regarding the foreign contractor’s status (Treas. Reg. §1.1441-1(b)(3)), it is generally easier to simply ask him or her to complete a Form W-8BEN.  By signing Form W-8BEN, the foreign contractor is certifying that he or she is not a U.S. person. is not a U.S. person?  If the contractor is an individual, perhaps he or she is a U.S. citizen living outside the U.S.?  While you may be able to rely on certain presumptions regarding the foreign contractor’s status (Treas. Reg. §1.1441-1(b)(3)), it is generally easier to simply ask him or her to complete a Form W-8BEN.  By signing Form W-8BEN, the foreign contractor is certifying that he or she is not a U.S. person.


In this circumstance there is no need for the foreign contractor to get a U.S. taxpayer identification number or to complete Parts II or III of Form W-8BEN. 


All that the foreign contractor needs to do is to complete the basic information in Part I and sign in Part IV, attesting that the information is true, correct, and complete.  No Form 1099 then needs to be filed for payments to foreign persons.  Treas. Reg. §1.6041-4(a).


The Form W-8BEN is not filed with the I.R.S.  It is kept on file with the U.S. payor in case the U.S. payor is audited.  If audited, the Form W-8BEN supports why no Form 1099 was issued and why no tax was withheld.


Please note that a competed XTRM profile is equivalent of a Form W-8BEN. 


Where Were the Services Performed?


Now that you know that the foreign contractor is not a U.S. person, how do you know that he or she is not performing some or all of the services in the U.S.?  Perhaps he or she spends two or three months a year at his or her second home in the U.S. and he or she works on your project while in the U.S.?

You won’t know if the services are performed in the U.S., unless you ask.  There is no special form for this.  


Through the XTRM portal all business transactions relating to payments are tracked including location of individual and services.