How US companies pay international contractors

For a US company, paying an international contractor takes four things, and the sequence matters: a signed agreement with defined scope, the correct tax status form collected before the first payment, an invoice your accounting system accepts, and a payout route that lands.

Get the sequence wrong and you end up with a payment nobody can explain a year later.

TL;DR

• The reporting threshold for Form 1099-NEC rose from $600 to $2,000 for payments made after 31 December 2025, under section 70433 of Public Law 119-21. It is indexed for inflation for payments made after 31 December 2026.
• Which form you collect depends on who the contractor is, not on where the money goes. US persons complete Form W-9 wherever they live. Everyone else completes a form in the W-8 series.
• A US payer generally files no Form 1099-NEC for a non-US contractor performing services entirely outside the United States, provided a valid Form W-8 is on file before the first payment.
• A Form W-8BEN signed at any point in 2026 runs through 31 December 2029. The clock is calendar-based, so the month of signature makes no difference.

This article covers the obligations of a US payer. A company incorporated elsewhere collects different forms and reports under different rules. As of September 2026.

How does a US company pay an international contractor?

Four steps, and the order is not interchangeable: agreement, tax status form, invoice, payment. Each one creates the document the next one refers to, which is why collecting the tax form after the first payment leaves a gap that cannot be closed by sending it later.

1. Sign an agreement that defines the deliverable and the fee
2. Collect the tax status form and verify identity, before any money moves
3. Receive an invoice that references the agreement number
4. Pay and keep the confirmation, in a currency the contractor's bank accepts

The second common error is treating the agreement and the invoice as separate administrative items. They are one chain. An invoice that does not reference the agreement it was raised against has to be matched to its contract by name and date, by whoever is reviewing your books.

What documents do you need before the first payment?

Three things: a signed agreement with a defined scope, verified identity, and the tax status form that matches who the contractor is. The form depends on the person's status and on where the work is performed, not on where the money is sent.

Forms in the W-8 series are not filed with the IRS. The payer collects and retains them, and produces them if asked. A missing or expired form leaves the payer without the support for treating the payment as it was treated.

Where no valid taxpayer identification number is held for a US person, backup withholding at 24% can apply.

What is the 1099 threshold in 2026?

$2,000. Section 70433 of Public Law 119-21, signed on 4 July 2025, amended sections 6041(a) and 6041A(a)(2) of the Internal Revenue Code and raised the reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000 for payments made after 31 December 2025. $600 is no longer the threshold for payments made in 2026.

The figure is indexed for inflation for payments made after 31 December 2026, so it will move again.

Worth checking against what your process assumes. The $600 figure stood for decades, and a workflow built on it will now generate forms that are not required.

You still collect the form from everyone. The threshold only decides who you file for.

Do you file a 1099 for a contractor outside the US?

Generally no. Sections 861(a)(3) and 862(a)(3) of the Internal Revenue Code source personal services income to the place where the services are performed. A non-US person performing services entirely outside the United States has no US-source income, so there is no Form 1099-NEC and no Form 1042-S.

This turns on status rather than location. A US citizen living in Lisbon is a US person, completes Form W-9, and does receive a Form 1099-NEC once payments reach the threshold.

The exemption depends on holding a valid Form W-8BEN or W-8BEN-E before the payment. Without it, the payer has no documented basis for treating the income as foreign-source.

The exception is physical presence. If a non-US contractor spends part of the engagement working inside the United States, that portion is US-source income regardless of where the contract was signed or where the payment was sent. It is reportable on Form 1042-S, with withholding of up to 30% unless a treaty rate applies. (As of September 2026.)

A week at your offsite is enough to create that portion.

How long is a Form W-8BEN valid?

From the date it is signed until the last day of the third calendar year that follows. Any form signed in 2026 runs through 31 December 2029, whatever month it was signed in. A change in the contractor's circumstances can end validity earlier, and the contractor supplies a new form when that happens.

The form is collected, filed and forgotten. The year it lapses is the year someone discovers that payments made after expiry have no documentary support behind them, and by then the fix is retroactive, which the sequence does not allow.

A quarterly check of which forms expire within the next twelve months costs an hour.

What does the invoice need to contain?

Enough to connect the payment to the work and to the agreement. That means an invoice number, the issue date, the number of the agreement it is raised against, the period covered, a description of what was delivered, and the amount.

A line reading "services" satisfies none of that.

The invoice format follows the contractor's country rather than yours. A US company receiving an invoice from a contractor in Poland gets a Polish invoice, on Polish terms.

In some places those rules are set by law. Article 226 of Council Directive 2006/112/EC lists the particulars a VAT invoice must carry across the EU, and Article 178(a) makes holding a compliant invoice the formal condition for deducting input VAT.

Poland goes further on form. Since 1 April 2026, structured e-invoicing through the KSeF system has been mandatory for most VAT-registered businesses established in Poland, and an invoice does not legally exist until KSeF accepts it. The smallest suppliers can stay outside until 31 December 2026 while their monthly business-to-business invoicing remains at or below PLN 10,000 gross. (As of September 2026.)

What does a complete document set for one contractor look like?

Five documents for one contractor for one month: the tax status form collected before anything started, the signed agreement, an invoice, a statement of service, and the payment confirmation.

The agreement number on the invoice is the link most often missing. Without it the invoice and the contract are two unrelated documents, and anyone reconciling them has to match by name and date.

The statement of service is the second gap. An invoice says what was charged. A statement of service says what was delivered, which is the part that supports treating the payment as a business expense against a defined scope.

How do contractor payments actually fail?

Not on the rail. Payments fail on documentation: a name on the invoice that does not match the name on the receiving account, a legal entity that changed since the agreement was signed, a missing reference that leaves the sending bank unable to establish what the payment is for.

None of those are visible from inside the company until the money stops. The invoice was approved, the payment was instructed, and then someone asks a question that takes three rounds to answer.

Kleos issues the full set for each payout, with the agreement number on every invoice. A statement of service is available alongside it.

Frequently asked questions

What is the 1099 threshold for 2026?
$2,000. Section 70433 of Public Law 119-21 raised the reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000 for payments made after 31 December 2025. The figure is indexed for inflation for payments made after 31 December 2026.

Do you send a 1099 to a foreign contractor?
Generally no. A non-US person performing services entirely outside the United States has no US-source income under sections 861(a)(3) and 862(a)(3) of the Internal Revenue Code, so no Form 1099-NEC is filed. This depends on holding a valid Form W-8BEN or W-8BEN-E before the payment is made.

How long is a Form W-8BEN valid?
From the date of signature until the last day of the third calendar year that follows, so a form signed at any point in 2026 runs through 31 December 2029. A change in the contractor's circumstances can end validity earlier.

What is the difference between W-8BEN and W-8BEN-E?
Form W-8BEN is for non-US individuals. Form W-8BEN-E is for non-US entities, including a contractor who invoices through their own company. Collecting the individual form from someone who invoices as an entity leaves the payer with documentation that does not match the counterparty.

Do you need a W-9 from a US citizen living abroad?
Yes. The form follows the person's status rather than their location, so a US citizen or US resident is a US person for this purpose wherever they live and work from. They complete Form W-9, not a W-8.

What happens if you pay a contractor before collecting the form?
The payment goes through and the documentation gap stays open. A form collected afterwards documents the position from its signature date forward. It does not retroactively support payments already made, which is why the sequence matters more than the checklist.

Pull up the last three contractor invoices you approved and check whether any of them reference the agreement they were raised against.

Last updated: September 2026.

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