W-8BEN, W-9 and 1099s: Paying Contractors Through Your LLC

The W-9 exists for the payer's benefit:

"Use Form W-9 to provide your correct Taxpayer Identification Number (TIN) to the person who is required to file an information return with the IRS to report, for example: Income paid to you."

IRS, About Form W-9. Page last reviewed or updated June 27, 2026. "The person who is required to file an information return" is you, once you are paying. The W-9 is how you get the payee's taxpayer identification number so you can do that.

The W-8 series is the foreign counterpart:

"you are a foreign person and you are the beneficial owner of an amount subject to withholding"

IRS, About Form W-8 BEN. Page last updated October 1, 2025. W-8BEN is for foreign individuals. W-8BEN-E is the entity version, described by the IRS as the "Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)."

That last row matters. Paying yourself is not paying a contractor, and treating an owner draw as a contractor payment to generate a deduction is a characterization question with real consequences. It is covered separately.

Payments to foreign persons can carry US withholding obligations, and the obligation falls on the withholding agent, which is the payer. That is your LLC, not the contractor.

The default rate is the statutory one:

Read that sentence again, because everything turns on three words in the middle. U.S. source income. Not "income paid by a US company." Not "income paid from a US bank account." Not "income under a contract governed by Delaware law."

For personal services, the source is where the work happens. The IRS says so in three places, across two documents, in the same words each time.

From the sourcing page:

The place, where the personal services are performed, generally determines the source of the personal service income, regardless of where the contract was made, or the place of payment, or the residence of the payer.

From Publication 515, the withholding agent's own manual:

If the income is for personal services performed in the United States, it is from U.S. sources. The place where the services are performed determines the source of the income, regardless of where the contract was made, the place of payment, or the residence of the payer.

And from the same publication's summary chart of source rules: pay for personal services is sourced by "where the services are performed."

So a designer in Warsaw doing your work in Warsaw is generating foreign-source income, and foreign-source income is outside the chapter 3 withholding net. Your US LLC paying them from a US bank account does not change that. Neither does the contract, the invoice currency, or your own residence.

The same publication puts the wage version of this bluntly:

Compensation paid to a nonresident alien for services performed outside the United States is not considered wages and is not subject to withholding.

Where it flips. The moment that contractor performs services physically inside Most types of US-source income received by a foreign person are subject to US tax at 30%, collected by withholding.[1]Internal Revenue Service

So the income from those days is US-source, and that default applies unless a treaty or an exception reduces it. A contractor who flies in for a two-week onsite has changed your obligation for those two weeks. That is the trigger worth watching, and it is a travel question rather than a tax question until it happens.

One exception we did not close. Publication 515 also says that "under certain circumstances, payment for personal services performed in the United States is not considered income from sources within the United States." We did not retrieve the enumerated circumstances. If your contractor works in the US, that is a practitioner's question and not one this page answers.

The W-8 series is documentation you hold, not something you file. The IRS wording:

Give Form W-8 BEN to the withholding agent or payer if you are a foreign person and you are the beneficial owner of an amount subject to withholding.

And, importantly for anyone who thinks a form is only needed when tax is owed:

Submit Form W-8 BEN when requested by the withholding agent or payer whether or not you are claiming a reduced rate of, or exemption from, withholding.

Both 1042 and 1042-S are due March 15 of the following calendar year, and the 1042-S is due to the recipient by the same date:

Forms 1042-S, whether filed on paper or electronically, must be filed with the IRS and be furnished to the recipient of the income by March 15 of the following calendar year.

Form 8809 buys an automatic extension on the IRS filing. Form 7004 extends the 1042. Neither extends the time to pay.

A staleness note worth carrying. As of September 2, 2026, the IRS's own documents are out of step with each other: Publication 515 is the 2026 edition, the Form 1042-S instructions are 2026, but the current Form 1042 revision is 2025, and both W-8BEN and W-8BEN-E are still the October 2021 revision. If a service tells you there is a new W-8BEN, there is not.

Collect the form before the first payment, not at year end. A contractor who has been paid and moved on has no incentive to send you paperwork, and you still have the obligation.

Store them. They are records supporting what you did and why.

Re-collect when circumstances change. A contractor who relocates, or an entity that restructures, may need a new form.

Do not decide for them. The form certifies their status. Asking a foreign contractor to sign a W-9 because it is simpler for you is asking them to certify something that is not true.

Everything above assumes the person is a contractor. Whether they are is a separate question, and the answer is not decided by what the agreement calls them.

The IRS applies a common-law test with three categories of evidence:

Behavioral Control: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial Control: Are the business aspects of the worker's job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship: Are there written contracts or employee type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

No single factor decides it. The IRS does not publish a scoring rule, a threshold number of factors, or a safe-harbour checklist, and anyone offering you one has invented it.

If you cannot tell, Form SS-8 exists:

If it is still unclear whether a worker is an employee or an independent contractor, or if your business consistently hires the same types of workers to provide specific services, you may consider submitting a Form SS-8.

The consequence of getting it wrong sits on you:

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker.

We looked for a dollar penalty and there is not one published. The IRS states the liability in the words above and no more. Any specific figure you find on a non-federal site is that site's own.

The part that reaches an owner personally. Publication 515 carries a warning that most contractor guides omit entirely, because it pierces the thing an LLC is usually bought for:

If you are a person responsible for withholding, accounting for, or depositing or paying employment taxes, and willfully fail to do so, you can be held liable for a penalty equal to the full amount of the unpaid trust fund tax, plus interest. A responsible person for this purpose can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business.

"Willfully" in this case means voluntarily, consciously, and intentionally. You are acting willfully if you pay other expenses of the business instead of the withholding taxes.

Paying your suppliers before you pay withheld tax is the definition given. This is the trust fund recovery penalty, and it is assessed against a person, not the entity.

The enumerated exceptions where services performed inside the United States are nonetheless not US-source. Section 530 relief from misclassification consequences. Any dollar-figure misclassification penalty, which the IRS does not publish. Treaty rate tables by country, which vary per treaty and are not summarized here.

Do I need to collect forms from contractors if I live abroad? The obligation sits on the LLC as payer, and where you live does not change it.

My contractor is not American. What do I collect? A W-8 series form. W-8BEN for an individual, W-8BEN-E for an entity.

Do I withhold on payments to foreign contractors? Only if the work is performed inside the United States. Services performed abroad are foreign-source income and outside the withholding regime, whatever the payer's mechanics and are not going to guess on a page where getting it wrong is your liability.

Can I just pay them and sort the paperwork later? You can, and collecting a form from someone already paid is much harder. Collect before the first payment.

Is paying myself a contractor payment? No. An owner draw from a disregarded entity is a different thing, and it is a reportable transaction on Form 5472.