How to send a 1099 to a contractor

1099 forms are essential legal & compliance forms when hiring an independent contractor as a US-based company. This article details how to send a 1099 to a contractor as well as information for the international variants, including the steps involved, how it varies by country, and the best methods on the market today. 

When do I need to send a 1099 to a contractor?

The IRS clearly lays out four conditions determining when it is appropriate to send a 1099 to a contractor:

• If the payment is to someone who is not an employee
• If the non-employee provided services in exchange for the payment
• The payment was made to an individual, partnership, estate, or (in specific cases) a corporation
• If the contractor has been paid $600 or more

Common variants of IRS 1099 forms

1099-NEC	Payments to independent contractors
1099-MISC	Miscellaneous income
1099-K	Payments received via third-party platforms
1099-INT	Interest income
1099-DIV	Dividends and distributions
1099-B	Income from broker or barter exchanges
1099-R	Retirement account distributions
1099-G	Government payments
1099-C	Canceled debts
1099-Q	Distributions from education savings accounts
1099-S	Proceeds from real estate transactions

Notably, the type of 1099 used depends on the circumstances of the payment; for example, payments made via credit card require a 1099-K, contractors working for government institutions would receive a 1099-G, while corporations are exempt from 1099 filing with the exception of attorney fees, medical payments, or rents.

What are the penalties if I’m not sure how to send a 1099 to contractors?  

Failing to send a 1099 to a contractor and file it correctly results in severe penalties. To begin, the IRS has a stated penalty for instances of failing to file as well as failing to provide the form to the contractor, issued per individual form.  

1099 misfiling: IRS penalties

≥30 days	31- August 1	August 1 – Not filed	Intentional disregard
$60	$130	$330	$660

Beyond this, however, there are several other penalties for US-based companies that either fail to file or file incorrectly, which we have detailed below:

1099 misfiling: Additional penalties

Name	Description
Disallowed Expense Deductions	The IRS’s decision to disallow deductions on expenses filed on your return for contracting services
Liability for Unwithheld Taxes	Penalties and fines for any taxes you were required to pay as a result of mishandling a 1042-S but did not pay, plus penalties and interest.
Backup Withholding	An additional cut of the freelancer’s pay is taken by the IRS in the event that they fail to submit a valid Taxpayer Identification Number (TIN)
State Penalties	US states have their own due dates, methods to file (although some use the IRS Combined Federal/State Filing program) and penalties for late filing.

January 31 (1099) and March 15 (1042-S — see section below) are critical dates to maintain compliance; each marks the deadline for filing with the IRS, after which point the penalties in the tables above begin to apply. 

What do I send for international contractors? 

The short answer is this: 

• If the contractor is US-based, they will need a Form 1099. 
• If the contractor is based anywhere else, they will need a W-8BEN to confirm their foreign tax status.

Beyond even this distinction, however, there are additional forms required when hiring internationally. If the contractor is working within the US (e.g., foreign consultants who fly in, even for a brief time, contractors working with on-site contracts, videographers who enter the country for a shoot), they will require a 1042-S. 

W-8BEN vs Form 1042-S for international contractors

	W-8BEN	1042-S
Use	Certifies that the contractor is not a US citizen, providing the option to claim tax treaty benefits	Reports any US-sourced income to a foreign contractor
Use case	Any instance in which a US-based company hires a foreign contractor	Reserved specifically for contractors working within the US
Who fills it out and when?	The contractor, prior to any payment	The employer, at year-end
Filled with IRS?	No – keep it on file	Yes

The central consideration between these two is whether or not the contractor performs ANY work in the US. This counts regardless of the duration they are in the country;  even something as small as a contractor attending a final review in person would require a 1042-S being filed for them. 

How does the process vary by country?

Filing a W-8BEN/1042-S has several additional layers of bureaucratic red tape that muddle the process. When hiring internationally, companies also need to be aware of any local forms that must also be filed, as well as who they must be filed with and the effects that any specific trade treaties might have on their decision. 

The following table outlines just a few examples from prominent freelancing countries:

How to send a 1099 to a contractor by country

What are the best ways to send/manage my forms?

The question of how to send a 1099 to a contractor is, at its core, a question of implementation. Business owners are very rarely filing these forms manually through the IRS; more often than not, they are working through some kind of management platform. 

The table below breaks down the four main ways to send a 1099 or W-8BEN to a contractor, evaluating each based on its ability to manage the task.

How to send a 1099 to a contractor: Delivery options

Features	Automation level (1-10)	Tax form support	Cross-border support	Compliance protections
Contractor Management Platforms	9.8	✅	✅	✅
Accounting Software	8.8	✅	❌	✅
Payment Platforms	7.4	Limited	✅	❌
Manual filing with the IRS	4.1	❌	✅	❌

Depending on what you might need, one of these options will be a better fit than the others:

Contractor Management Platforms are the gold standard for contractor management. providing options for full compliance, robust automation options, and the ability to automate locally compliant contracts and paperwork for companies  considering international hiring.

Accounting Software works well for companies hiring US freelancers, but often don’t have tools for international hiring, like multi-currency wallets.

Payment Platforms aren’t typically designed for compliance, but sometimes provide options for tax filing along with payment services.

Manual filing with the IRS works well for small operations with a small number of contractors, since it reduces monthly costs for the employer.

Are you still unsure how to send a 1099 to a contractor? 

For how simple a question it seems, figuring out how to send a 1099 to a contractor the right way is surprisingly difficult. If you have questions about how to implement your own contractor management system, consider speaking with one of our experts for more information, or sign up and try a free demo.