What contractor paperwork do I need?

It is recommended to understand what kind of paperwork is involved when engaging an independent contractor.

The following table provides a high-level summary of contractor paperwork, including who files it, who they file it with and what deadline, as well as the average penalty for not filing/filing late.

Contractor Paperwork, Outlined

Form	Who Files It…	…Sends it to…	…By this deadline	Penalty for Late Filing (or Failure to Provide)
W-9	Payee (Independent contractor or vendor)	The payer	Before any reportable payment is made	Failure to furnish a correct TIN on W9: Backup withholding (24%) on reportable payments.
1099	Payer (business or individual making reportable payments)	Copy A: IRS	February 28 (e-file by March 31)	≤ 30 days late: $60 per form if filed By August 1: $120 per formAfter August 1 or not filed: $310 per form if filed.Intentional disregard: ≥$630 per form (no max) Same tiers if the payee’s TIN is incorrect or missing,
		Copy B: Payee	January 31
		Copy 1: State tax authority (if required)	February 28 (e-file by March 31)
		Copy 2: Payee state tax return (if required)	January 31
1096	Payer (only when paper-filing 1099)	IRS	February 28	Same tiered penalties as 1099
W-8BEN	Foreign Payee	The U.S. payer (withholding agent)	End of the third calendar year after signing	If the payee fails to furnish W-8BEN, the payer must withhold U.S. tax at the statutory rate (30%) on any U.S.-source payment.
1042-S	Withholding agent (U.S. entity paying U.S.-source income to foreign persons)	Copy A: IRS (with Form 1042)	March 15 (paper or electronic)	Failure to file by March 15: $60 By August 1: $120 per form After August 1: $310 per form Intentional disregard: ≥$630 per form (no max)
		Copies B–D: Foreign payee	March 15
1042	Withholding agent (U.S. entity summarizing all payments)	IRS	March 15	Failure-to-file/pay penalty: 5% of unpaid tax per month (up to 25%).
945	Payer (Entity withholding federal income tax)	IRS	January 31	• Failure to file/pay by January 31: 0.5% per month (up to 25%), with interest on unpaid tax/penalties accruing daily.

For a more in-depth discussion of these items, the following sections provide details on each of the forms listed in this table. 

We have organized them according to domestic and international contracting scenarios to see how related documents blend. 

1) Form W-9 (Domestic)

A W9 is used to certify the payee’s Taxpayer Identification Number (TIN) or Social Security Number (SSN), thus clearing them to work as an independent contractor in the United States. 

Who qualifies for a W-9 can be confusing, especially in instances where companies are hiring internationally. The following table breaks down these distinctions according to citizenship, “Substantial Presence Test” status, and location. 

Tax forms for hiring contractors based on location & citizenship status

Contractor Type	SPT Met?	Location	Form to Collect
US Citizen	N/A	Anywhere	W-9
Green Card Holder	N/A	Anywhere	W-9
Foreign National	Yes	Inside US	W-9
Foreign National	No	Inside US	W-8BEN
Foreign National	N/A	Outside US	W-8BEN

Although the form itself is not filed with the IRS, it must be filled out by the payee before the first payment is made to minimize the risk of costly back taxes and withholding on their 1099.

Link	Deadline to File	Average Penalty
IRS Form W9	Before 1st payment	Backup withholding (24%) on reportable payments

2) Form 1099 (Domestic)

A 1099 is the standard tax form for independent contractors, with the most common variant being the 1099-NEC. These forms are calculated by the payer and delivered to the recipient and the IRS by February 28th. 

Form 1099-NEC is the standard 1099 for independent contractors; however, several other versions may apply for independent contractors

Common 1099 variants for independent contractors

1099 Form	Purpose
1099-NEC	Payments to independent contractors (Non-employee compensation)
1099-MISC	Rent, prizes, royalties
1099-K	Payments via third-party platforms
1099-INT	Interest income

Payers (often the hiring individual/company) are responsible for determining the correct 1099, calculating the amount totals, and delivering them by the appropriate deadline. 

The payee (the independent contractor) is responsible for providing a valid TIN, which allows for correct filing.

Link	Deadline to File	Average Penalty
IRS Form 1099	February 28 (e-file by March 31)	$600-$310 per form

3) Form 1096 (Domestic)

Filing a 1096 is not typically necessary unless you plan on submitting physical paper forms. A 1096 provides a summary sheet of all the 1099s being submitted, including the total number of forms and the total amount paid. Business owners paying via e-file do not have to use a 1096.

Link	Deadline to File	Average Penalty
IRS Form 1096	February 28	$600-$310 per form

4) W-8BEN (International)

A W-8BEN is the international equivalent of the W-9, allowing foreign contractors to provide their registration for correct tax filing purposes. In addition, it allows them to claim tax treaty benefits where applicable, assuming they meet one of several protected group statuses. 

The W-8BEN is the appropriate form when contracting the services of a foreign individual. When working with a foreign agency or business, however, you will need to use the W-8BEN-E to properly gather their information for correct tax filing.

Link	Deadline to File	Average Penalty
W-8BEN	Before 1st payment	Withholding U.S. tax at the statutory rate (30%) on any U.S.-source payment

5) Form 1042-S (International)

Form 1042-S documents the amount paid and tax withheld for international contractors. In addition, it specifies federal procurement payments paid to foreign persons that are subject to withholding under section 5000C and reports income distributions by a publicly traded partnership or nominee. 

Payers must provide it to contractors before March 15th to ensure that they are able to file on time. 

Note: Withholding agents with fewer than 100 partners can file physical copies with Form 1042, as listed below.

Link	Deadline to File	Average Penalty
IRS Form 1042-S	March 15	$60-$310 per form

6) Form 1042 (International)

Form 1042 is a record of all the 1042-S documents that a payer is filing for their independent contractors. In addition, it includes totals for taxes withheld under chapters 3 and 4, as well as those withheld under section 5000C in the federal tax code. In addition, it includes information on:

• Total income
• Amount of tax withheld
• Total # of forms filed

Link	Deadline to File	Average Penalty
IRS Form 1042	March 15	5% of unpaid tax per month (up to 25%)

7) Form 945 (International)

Form 945 is used to report withholding from non-payroll sources of income. It is not always used because it rarely applies to independent contractors, but it can be necessary if the payment includes:

• Pensions (including distributions from tax-favored retirement plans (e.g., 401(k), 403(b), 457(b)) 
• Annuities
• Military retirement
• Gambling winnings
• Indian gaming profits
• Voluntary withholding on certain government payments
• Backup withholding

This form requires electronic fund transfer (EFT) in order to file, which often requires the use of a third party, but can be facilitated through the Electronic Federal Tax Payment System (EFTPS).

Link	Deadline to File	Average Penalty
IRS Form 945	January 31	0.5% per month (up to 25%), with interest

Managing contractors with Payoneer Workforce Management

Determining the correct tax forms when bringing on an independent contractor can be especially difficult, especially when reaching across international borders to do so. For that reason, many business owners often turn to a contractor management system like Payoneer Workforce Management for support and guidance.

Book a demo today to learn more.