With RemotePass, we can process payments on the same day if needed, which has been a how to pay international contractors game-changer. Our employees in 13 countries now have access to transparent exchange rates and more withdrawal options. We’ve eliminated the frustrations of hidden fees and long payment delays, and our finance team is no longer bogged down by managing multiple payment cycles. A practical 10-step blueprint to hire, manage, and offboard independent contractors—complete with compliance, contract templates, and best practices.

• Which is why your contract should include language confirming that all work is performed outside the United States, and that the contractor is responsible for their own taxes in their jurisdiction.
• Integrated contract creation and payment processing streamline administrative tasks.
• If you cannot determine whether the payee is a foreign person or a U.S. person, the presumption rules require you to treat the payee as a non-exempt U.S. person and deduct backup withholding.
• It protects both sides, sets clear expectations, and helps your business stay legally compliant.
• I had been losing sleep over whether I was handling my international contractors correctly.

See Bench’s features in action

This is the perfect method if you value security and reliability and don’t mind having to pay higher fees on transactions or waiting for a few days until they are processed. Checks don’t come with fees, outside of any postal fee for sending the payment via mail, but they travel slow and risk alienating valued contractors who want to be paid quickly and efficiently. RemotePass has really helped us take the pain out of managing salary payments, contract managements, and admin work with our remote teams. Receiving a 1099 does not automatically mean that the contractor owes taxes. Instead, it indicates that the income earned has been reported to the IRS as part of the annual information collection process.

The Pros Of Paying Via Freelancer Sites

When a worker is determined to be an independent contractor, the contractor is responsible for their own income tax obligations. An international contractor is someone who operates from a different country and holds noncitizen status. This criteria is consistent no matter where you are headquartered or where local country of the worker you plan to hire. With that said, the classification of a contractor hinges on the type and duration of services rendered.

for Foreign Contractors & Americans Abroad

This includes filing Form 1042, the Annual Withholding Tax Return for U.S. This form allows them to avoid the 30% withholding tax on U.S.-sourced income, as it will be taxed at graduated rates under applicable IRS regulations. The form requires details about the contractor’s U.S. business activities and income types. The W-8 series forms help U.S. companies confirm a foreign contractor’s status and determine applicable tax withholding requirements. Each form addresses specific aspects of compliance and treaty benefits.

• Whether you want to hire a single foreign contractor or build a distributed team, this guide will walk you through every step.
• We’ve simplified the filing process and added more flexible options for importing your data.
• The standard withholding rate on certain U.S.-sourced income, such as royalties or interest, is 30%.
• If you or your business holds more than $10,000 across foreign accounts at any point during the year, you may trigger FBAR filing (FinCEN Form 114).
• In Romania, starting in 2017, companies hiring individual contractors should pay the same payroll taxes as they would hired employees.
• With the responsibility of having to pay their own taxes and manage business expenses, they gain autonomy and flexibility.

Forms & Instructions

• With RemotePass, we can process payments on the same day if needed, which has been a game-changer.
• Understand the essentials of hiring international contractors, including classification, necessary forms, and compliance with U.S. tax regulations.
• Any specific questions you may have can be sent to /contact and we would be happy to assist you.
• They can sign their contractor agreement, enter payroll details, get a company email address, and more—all in one workflow.
• The payor for independent contractors has the right to control only the result of the work and not what will be done or how it will be done.Independent contractors are subject to Self-Employment Tax.

When submitting Copy A to the IRS, you can file it electronically or by mail. Both copies (A and B) are due by January 31, regardless of which method you use. While W-8BEN contra asset account and W-8BEN-E are the most common for foreign workers, the IRS issues other types of Form W-8 depending on the business structure or type of income. This tax reduction is possible in both cases (individual contractor or business entity) if the US has a tax treaty with the country from which the contractor comes.

File

The employer of record, sometimes referred to as an international PEO, is responsible for making compliant payments to your in-country workers and remitting all employer and employee taxes. Hiring and paying foreign contractors can be complex and cumbersome, especially for companies that employ contractors in multiple countries with multiple currencies. Managing the payment schedules and currency exchanges can quickly become overwhelming. Payment is fairly easy and fast on a digital basis, unlike money orders or international payments, which can take days to process. Fees are in play for both the payer and the payee, and it’s common for exchange rates to be marked up with a foreign contractor digital payment.

There are many ways to find high-quality international independent contractors. Online platforms like Upwork and Toptal offer access to thousands of verified professionals across industries. These marketplaces are a popular choice for companies that want to hire quickly. Many businesses work with remote administrative professionals who handle scheduling, inbox management, data entry, and customer support. These https://emasenior.com/2021/11/25/20-best-crypto-accounting-software-in-2025/ independent contractors help streamline day-to-day operations without the overhead of hiring a full-time employee. The difference between contractors and employees is not just about wording.