US tax forms for paying Latin America contractors

A US company pays a developer in Colombia $8,000 a month. The developer is a Colombian citizen and resident, works from home in Medellin, and has never set foot in the United States. The finance team asks what to file in January. The answer, which surprises almost everyone the first time, is nothing. No Form 1099-NEC, no Form 1042-S, no withholding. The only paperwork the arrangement generates is a Form W-8BEN that you collect once and keep in a folder.

That result follows from one rule applied twice. The IRS states it directly: “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.” The developer performs the services in Colombia, so the income is foreign source. A nonresident alien is generally subject to US income tax only on US source income, so there is no US tax and nothing to withhold against.

The reporting forms fall away for the same reason. The instructions for Form 1042-S define the reportable universe in a single sentence: “Amounts subject to reporting on Form 1042-S are amounts from U.S. sources paid to foreign persons.” Foreign source compensation is not in that set. And Form 1099-NEC runs on the other track entirely, reporting payments to US persons, which a Colombian citizen and resident is not. There is no third form waiting behind them.

None of this affects the deduction. The payment is an ordinary and necessary business expense and it is deductible whether or not an information return is filed. What supports the deduction is the contract, the invoice, and the proof of payment, which is the same file you would keep for any vendor.

Which W-8 you collect depends on what your counterparty is, not on what they do. An individual signs Form W-8BEN. A contractor billing through their own company signs Form W-8BEN-E, the entity version, which also captures chapter 4 status and is the form most often returned incomplete. In Brazil this distinction catches nearly everyone, because most Brazilian professionals working with US companies operate as a pessoa juridica and invoice through a CNPJ rather than a CPF. The counterparty on that contract is a company, so the entity form applies even though one person does the work.

Two mechanical points matter more than they sound. First, the form is not filed with the IRS. The instructions say so in as many words: do not send Form W-8BEN to the IRS, give it to the person requesting it. It lives in your vendor file and it is produced only if someone asks. Second, it expires. A W-8BEN is generally valid from the date of signature through the last day of the third succeeding calendar year, so one signed in 2026 lapses on December 31, 2029 unless it carries a US taxpayer identification number or a change in circumstances invalidates it sooner. Nothing announces the lapse. A company that collected forms diligently in year one and never set a reminder is undocumented in year four while believing it is covered, which is exactly the state the presumption rules are written for.

The workable habit is to treat the W-8 like an insurance certificate: collected before the first payment, checked for a real signature and a non-US permanent address, filed with an expiry date attached, and refreshed on a calendar rather than on memory.

An onsite visit is the one common event that changes the answer, and it changes it more than teams expect. Compensation for labor or personal services performed in the United States is US source income under IRC section 861(a)(3), normally allocated on a time basis across days worked. Five US days out of roughly 240 working days makes about 2% of the year’s compensation US source. That slice is subject to 30% withholding unless a treaty reduces it, is reported on Form 1042-S, and brings Form 1042 with it as the annual withholding return, both due March 15 following the calendar year.

The exception everyone reaches for is in the same statute, and it usually does not apply. Section 861(a)(3) excludes compensation where the services are performed by a nonresident alien temporarily present in the United States for 90 days or fewer, the compensation does not exceed $3,000 in aggregate, and, in the third condition that does the damage, the services are performed under a contract with a nonresident alien, foreign partnership, or foreign corporation not engaged in a US trade or business, or for an office maintained in a foreign country by a US payer. A US company bringing its own contractor to its own US office satisfies neither branch of that third condition. The days count is the part people check and the contract condition is the part that fails.

Where a treaty exists, a nonresident individual claims relief on personal services income using Form 8233 rather than a W-8BEN, which is a different form on a different schedule. Where no treaty exists, which covers nine of the eleven markets here, there is no claim to make and the statutory position stands.

There is also a question that is not a tax question at all. Whether a foreign national may perform paid productive work for a US company while physically in the United States is decided under immigration law, and a visitor admitted for meetings and conferences is generally not permitted to do it. That analysis is separate, it is not fixed by withholding correctly, and it is the reason the decision belongs before the flight is booked rather than after.

Ask for the local invoice by its local name. It is the fastest available signal that the person on the other side is properly registered, and it costs you one sentence in the onboarding email. A Mexican contractor issues a CFDI stamped by SAT, which cannot be produced informally, and many bill under the Regimen Simplificado de Confianza. A Brazilian issues a nota fiscal de servico. A Chilean issues a boleta de honorarios electronica through the SII, which for a foreign client comes without the domestic provisional retention, so the amount you pay is the amount on the document. A Colombian issues a DIAN-validated factura electronica, generally without an IVA line where the export conditions for services are met. A contractor who cannot produce the document their own tax authority requires is telling you something useful about how their side is organised.

The third document is the one with the longest tail. US tax forms establish who the payee is for US purposes; they say nothing about whether the relationship is independent contracting or employment under the law of the worker’s own country. Labour authorities across the region look at control: who sets the hours, who directs how the work is done, who supplies the equipment, whether the worker is economically dependent on a single client, and whether the arrangement is exclusive and open ended. A full-time engagement with fixed hours, daily standups, a company laptop, and two years of continuous work looks like employment in most of these jurisdictions no matter what the contract is titled. That risk sits in the worker’s country, not in the IRS file, and it is the one that grows quietly with tenure.

LavaStaff scopes, sources, vets, and supports the hire, and on managed engagements handles payroll and compliance, directly or through a vetted EOR partner depending on your needs, so your internal team does not have to build that operating layer from scratch.