Do I send a 1099-NEC to a contractor living abroad?
Often not, and the reason matters more than the answer. This slip reports non-employee compensation inside the US reporting system. Where the services were performed is what decides the question: a contractor working entirely outside the United States is generally outside this reporting and inside the foreign-payment regime instead, which uses different certificates, a different return and different withholding. So the test is not where the contractor banks or holds citizenship, but where the work was done. Settle that first, because choosing the wrong regime means filing the wrong form and skipping the right one.
Who has to file Form 1099-NEC for contractor payments?
A US business that pays contractors for services in the course of its trade or business, where those payments sit inside the US reporting system. The obligation is the payer's rather than the contractor's, and it is not removed by the contractor invoicing through a company name, working briefly, or being based abroad — those facts change which regime applies, not whether the payer has to work the question out. Where some of your contractors are outside the United States, the population has to be split before any slips are prepared, because the two regimes are reported on different forms.
My contractor is a non-resident but worked in the US — does that change it?
Then you are in the harder half of this question, because the place the services were performed is what decides it. Work physically carried out in the United States does not leave the US reporting system simply because the person doing it lives elsewhere. Payments like that need the contractor's status established and the characterisation settled before any slip is issued, and they may still sit in the foreign-payment regime rather than on this form even though the work was done onshore. Get the facts on residence, status and place of work into the file before reporting season, not during it.
Does a foreign contractor need to give me a tax form?
You need documentation of their status from them, and it is not the same documentation for both regimes. A payment inside the US reporting system and a payment inside the foreign-payment regime call for different certificates from the contractor, and the certificate is what supports the treatment you then apply. Collect it when the contractor is engaged rather than when the slips fall due: a missing certificate at reporting time leaves the payer choosing between a treatment it cannot support and a delay it will be measured on. Keep the certificate with the contract and the invoices.
Do I withhold tax on payments to an overseas contractor?
That depends which regime the payment sits in, which is why the place the services were performed has to be settled first. Payments inside the US reporting system and payments inside the foreign-payment regime carry different withholding, and the second is not simply the first with a different slip attached. A payer that reports on this form when the payment belonged in the other regime has usually also failed to withhold, so the reporting error and a withholding exposure arrive together. Decide the regime, collect the matching certificate, and set the withholding from that decision.
Contractor or employee — does it change which form I file?
It changes everything downstream. This slip is for non-employee compensation, so it presupposes that the person is not an employee. If the relationship is in fact employment, the payment belongs in payroll reporting and withholding rather than here, and the cross-border position becomes a different exercise again. Settle the status question on the working arrangements rather than on what the agreement is titled, and record the basis. A payer who has the status wrong is exposed on two fronts at once: the wrong reporting form, and the withholding that should have accompanied the right one.
What is Part XIII withholding?
Canada's flat withholding on certain payments to non-residents — dividends, interest to related parties, rents, royalties, pension and annuity payments, management fees. The payer withholds and remits, and is liable if they do not, which is why they insist on documentation. A treaty can reduce the rate, but only where the recipient has given the payer the declaration establishing entitlement before payment. Where too much was withheld, a refund claim is the route, with its own time limit. See Part XIII withholding review.
How do I get back tax withheld in another country?
By the route that country provides, and it is rarely automatic. Where an elective return is available — on rent or pension income, for instance — filing it recomputes the tax on net income and refunds the difference. Where it is not, you file a refund claim with the withholding authority, supported by evidence of your residence and entitlement to the treaty rate. Both take time, which is why fixing the rate before payment is worth more. See withholding refund and recovery.
