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Does your company work with external contractors? Is your company based in the United States? 

If you answered “yes” to both questions, you’re going to like what you’re about to read.

We’re excited to share the details of our new tax compliance feature for Remote’s Contractor Management platform, specifically designed to help HR and finance administrators meet IRS rules. 

You probably already know about the income reporting regulations required by the Internal Revenue Service (IRS) — and you definitely appreciate how challenging it can be to stay on top of the taxation requirements when managing independent contractors. Now, Remote makes it easier than ever to manage your US contractors compliantly.

Let’s look at the latest IRS regulations and see how Remote takes the manual work out of this compliance challenge.

Contractor tax information US companies need to collect

IRS rules require companies to report to the government how much the company has paid to contractors who earned more than $600 over the tax year. This means the company must first collect the contractor’s taxpayer information, including their taxpayer identification number and other personal details. 

  • Companies must collect Form W-9 from each contractor within the US.
  • Companies must collect Form W-8 BEN from each contractor working outside the US.
  • Sometimes, companies work with international contractors who bill through their own entities. This situation requires a Form W-8BEN-E.

Forms W-8BEN and W-8BEN-E ask the contractor to confirm whether the country they reside in has a tax treaty with the US, which determines whether the payer should withhold tax from the payment. Not withholding the taxes could result in trouble with the US tax authorities and owed back taxes. 

Any forms collected should be securely stored and made available for later reference. 

How Remote helps with contractor management

When you invite new contractors to onboard through Remote, they’ll automatically be asked to provide the correct form that applies in their situation. They can download the template in one click, sign, and upload right away.  

Two HR professionals collaborate using new tools from Remote

These forms are stored in the Documents tab for easy access. 

If you already manage contractors via Remote, they will see a notification asking them to provide the correct form before uploading their next invoice. 

Generating 1099-NEC forms

After collecting the appropriate forms, the company must then send contractors another form summarizing the income paid to the contractor and whether any taxes were withheld.

  • US-based contractors (those who provide a W9 form ) should be sent Form 1099-NEC if they have been paid more than $600 in the tax year.
  • International contractors (who provide W-8BEN or W8BEN-E forms) should be sent a 1042-S form, regardless of how much they have been paid.

If you work with just one long-term contractor, generating the appropriate forms may be simple. However, the manual effort required to generate forms for dozens or hundreds of contractors can quickly become unsustainable. 

Finally, the company must file a summary of all 1099 and 1042-S forms they have generated to the IRS. 

Remote helps you stay organized

At the end of every tax year, Remote automatically generates the correct forms for every contractor with a paid invoice in the last year. Contractors and admins can access these forms directly in the Documents tab. 

Frequently asked questions about contractor tax management

Looking for answers? Remote is always here to help.

We haven’t collected tax forms or reported contractor payments before. Do we really need to start now?

Yes. Any US-based company that works with local or international contractors should follow the reporting requirements outlined by the IRS. Not following the proper withholding and reporting requirements could lead to penalties of up to $270 per contractor, plus back taxes. 

Will every contractor need to provide a tax form, even if they are not US citizens?

Yes. If the company is based in the US, every contractor must provide either a W9, W-8BEN, or W-8BEN-E to declare their tax status. 

My company is not based in the US, but we do have US contractors. Do we need to do anything? 

No. If your company is based outside of the US, then you have nothing to worry about! You have no requirements to report contractor payments to the IRS. 

Is Remote responsible for filing Forms 1099 and 1042-S to the IRS?

No. Remote operates as a payments provider, allowing contractors to upload invoices and receive payments in their local currencies. Your company — as the contracted party — retains final responsibility for compliance with your contractors.

Focus on your business, not contractor administration

This new product release is just one part of Remote’s long-term plan for easier contractor management. Stay tuned for our upcoming product announcements as we continue to help companies onboard and pay contractors around the world, reduce manual effort, and stay compliant with international laws. 

Ready to onboard contractors now? Get started today with Remote’s contractor management platform. The signup process takes just a few minutes, and you can start paying contractors in 170+ countries around the world. No hidden fees, no surprises.