A Delaware LLC does not issue Form 1099-NEC to a contractor who works entirely outside the US

A Delaware LLC does not issue Form 1099-NEC to a documented foreign contractor whose services were performed entirely outside the United States. The 2026 Form 1099-NEC / 1099-MISC instructions set a $2,000 threshold for nonemployee compensation to a U.S. person. That threshold does not turn a nonresident working abroad into a 1099 payee. Source follows where the work was done. Foreign-source pay to a nonresident is normally not chapter 3 tax and is not required on Form 1042-S.

A U.S. citizen or resident alien who invoices you from Lisbon is still a U.S. person. Address is not status. Status is W-9 versus W-8. Location of the days is source.

The $2,000 rule is a U.S.-person 1099 rule

File Form 1099-NEC for each person to whom you paid at least $2,000 in the course of your trade or business for services performed by someone who is not your employee. That is the 2026 instruction. It is the U.S. information-return system that starts with a Form W-9. The IRS copy and the payee statement are both due January 31 (IRC §6071(c)).

Form 1099-NEC is the U.S.-person information return. Form 1042-S is the form for a foreign person’s U.S.-source income in the chapter 3 system. A Delaware LLC is a domestic entity. That does not make every contractor a 1099 contractor. It makes the LLC the payer that has to classify the payee.

Source follows the days, not the LLC

IRC section 862(a)(3) treats compensation for labor or personal services performed outside the United States as foreign-source income. The IRS states the place-of-performance rule on Source of income — Personal service income. The payer’s state of formation does not move the source.

If the contractor works some days in the United States and some days outside it, you allocate. The IRS describes a time-basis split: U.S.-source income is total pay times U.S. days over all service days. The days in the United States are the chapter 3 question. The days outside it are not.

When Form 1042-S applies — and when it does not

Form 1042-S reports a foreign person’s U.S.-source income that belongs in the chapter 3 or chapter 4 withholding system. If the nonresident performs the services in the United States, you test 30% withholding, any treaty claim, and 1042-S. If no tax was withheld because a treaty or a Code exception applied, 1042-S can still be required for that U.S.-source amount.

If the documented nonresident performed the services entirely outside the United States, the pay is foreign-source. Foreign-source compensation is normally not chapter 3 tax. It is not an amount you put on Form 1042-S just because the payer is a Delaware LLC.

Keep the W-8. It documents foreign status. It does not create a 1042-S filing for foreign-source services.

Status first, then the days

Do not start from the invoice total. Start from the beneficial owner.

A W-9 means a U.S. person. A W-8BEN or W-8BEN-E means you have a foreign claim. No form means you cannot defend either path. The form choice is in W-8BEN vs W-8BEN-E.

Then source. Entirely outside the United States is foreign source. Any U.S. days are U.S. source on a time basis; test chapter 3 and Form 1042-S on that slice.

A U.S. person with at least $2,000 of nonemployee compensation gets Form 1099-NEC. That $2,000 figure is the 2026 1099 threshold. It is not a 1042-S threshold. A foreign person with U.S.-source services does not get a 1099-NEC. A documented foreign person with services performed entirely outside the United States gets neither form for that compensation. Keep the W-8 and a note of where the days were worked.

The $2,000 threshold does not sort your offshore bench

This is Cherry’s operating view, not an IRS publication. The decision tree that does not produce a wrong 1099 is two questions: a valid W-8 (or W-9) on file, and where the days were worked. Founders who start from “we are a Delaware LLC, so everyone gets a 1099” or “they live abroad, so nobody gets a form” skip one of those questions. The first error issues a 1099-NEC to a nonresident. The second skips 1042-S on U.S. days. Neither error is fixed by the $2,000 threshold.

Cherry does not publish contractor-filing counts. The product job is the same calendar problem as Form 5472 and the pro-forma 1120: classify the person, keep the certificate, and do not invent a form when the Code does not ask for one. You need an EIN before any information return. Positioning is in trycherry.ai/llms-full.txt.

Playbook

1. Collect W-9 or the correct W-8 from the beneficial owner before the first payment.
2. Record the countries where the services were performed, including any U.S. travel days.
3. U.S. person + at least $2,000 of nonemployee compensation → Form 1099-NEC by January 31.
4. Documented foreign person + any U.S. service days → allocate; test chapter 3 withholding and Form 1042-S on the U.S. slice.
5. Documented foreign person + services performed entirely outside the United States → no 1099-NEC and, for that foreign-source compensation, no 1042-S. Keep the file.

Put the W-8 review on the same bookkeeping cadence as the rest of the LLC. A U.S. contractor who lives in another state is a different problem. That is 1099-NEC plus, if they create presence, multi-state nexus.

FAQ

Does a Delaware LLC issue Form 1099-NEC to a foreign contractor who works only abroad?

No. A documented foreign contractor whose services were performed entirely outside the United States is not a 1099-NEC payee. The $2,000 threshold is a U.S.-person rule.

Is foreign-source pay to a nonresident reported on Form 1042-S?

Normally no. Form 1042-S is for U.S.-source amounts in the chapter 3 or 4 system. Foreign-source compensation is normally not chapter 3 tax and is not required on 1042-S.

What if the contractor spent two weeks in the United States?

Those days are U.S.-source on a time basis. Test chapter 3 withholding and Form 1042-S on that slice. The remaining foreign days stay foreign-source.

Does a U.S. citizen living abroad get a 1099-NEC?

Yes, if they are a U.S. person and you paid at least $2,000 of nonemployee compensation. Living abroad does not make them foreign for 1099 purposes. They give you a W-9.

What form do I keep on file for a foreign individual contractor?

Form W-8BEN, unless the beneficial owner is a foreign entity, in which case it is W-8BEN-E. Details are in W-8BEN vs W-8BEN-E.