5 Essential Documents When You Hire Contractors

Form W-9 for US-Based Contractors

The W-9 is the standard tax form for any contractor based in the United States. The form should include the contractor's legal name, business name (if they use one), and their tax classification - whether they're a sole proprietor, LLC, or corporation.

This form stays in your records - you don't submit it to the IRS. However, you'll use this information when you file the contractor's 1099-NEC at year-end for any payments totaling $600 or more. Keep the W-9 on file for at least four years after their last payment.

Form W-8 for International Contractors

When hiring contractors outside the US, you'll need a different form - the W-8.

There are two main versions:

• W-8BEN for individuals
• W-8BEN-E for companies or entities.

These forms help establish that your contractor is not subject to US tax withholding requirements.

The W-8BEN is typically what you'll need for individual freelancers. It's more complex than a W-9 because it deals with international tax treaties. Your contractor will need to provide their foreign tax identification number and country of residence. This helps determine if they qualify for reduced tax withholding under a tax treaty.

These forms remain valid for three years unless the contractor's information changes. Like W-9s, you keep these forms in your records rather than sending them to the IRS. However, you'll need the information when filing Form 1042-S, which reports payments to foreign contractors.

Thera tip: getting the right form is crucial. Using a W-9 for a foreign contractor or a W-8 for a US contractor can create serious tax reporting issues down the line. When in doubt, look at where your contractor is tax resident, not their current location or citizenship.

Independent Contractor Agreement

This document is your legal shield and operational guidebook rolled into one. While not strictly required by law, having a written agreement is essential for protecting your business.

A well-drafted contractor agreement outlines the entire working relationship: what work will be done, how much you'll pay, when payments are due, and what happens if either party needs to end the relationship.

It should clearly state that the person is an independent contractor, not an employee, and include clauses about work ownership, confidentiality, and how disputes will be handled. In case of an IRS audit, this agreement helps prove the worker's contractor status. Have a lawyer review it to ensure it covers all bases and complies with your state's laws.

Form 1099-NEC (Non-Employee Compensation)

This form is your yearly tax reporting obligation for contractor payments. If you pay any contractor $600 or more in a year, you must file this form with the IRS and send a copy to the contractor.

The 1099-NEC reports the total amount you paid the contractor during the tax year. You need to send it to contractors by January 31st of the following year. The IRS uses this form to track independent contractor income and ensure proper tax reporting.

Make sure you have your contractor's correct tax information from their W-9 before filing this form. Missing or late 1099s can result in penalties from the IRS.

Invoices

The IRS requires you to keep contractor invoices for at least three years. Each invoice should match the payments you report on the contractor's 1099-NEC at year-end. Store these invoices somewhere secure and organized - you'll need them during tax season and in case of an audit.

A proper contractor invoice must include the contractor's name, address, and tax ID number (from their W-9). The invoice should also clearly show the service dates, work description, and amount charged. Make sure each invoice has a unique number - you'll need this for tracking payments and filing taxes.

Two things that people often miss:

• Always verify the business name on invoices matches their W-9 exactly - mismatches can cause tax filing issues.
• If a contractor changes their business name mid-year, you'll need separate 1099s for each name
• Keep canceled invoices too - don't just delete them. Note why they were canceled. It's because The IRS may question discrepancies between contractor-reported income and your records. Canceled invoices help explain gaps in invoice numbering or payment sequences. For instance, if a contractor reports Invoice #100 on their taxes but you paid #101, having the canceled invoice shows the complete transaction history.

Skip the Hassle and Hire Global Contractors Compliantly with Thera

Staying compliant with independent contractor paperwork doesn't have to be overwhelming, but it does require attention to detail and consistent documentation practices. As your business grows and you bring on more contractors, managing all these forms, deadlines, and requirements can become increasingly complex and time-consuming.

That's where Thera comes in to make your life easier. Here's what you get:

• All your contractor paperwork in one place
• Automatic collection of W-9s and sending of 1099s
• Quick contractor payments with better exchange rates
• Direct support through Slack whenever you need help

Best of all, your contractors get paid faster and keep more of their earnings thanks to Thera's competitive exchange rates, creating a win-win situation for everyone involved.

Want to stop worrying about contractor paperwork? Schedule a call with contractor experts at Thera today and see how we can help you manage your contractors while staying fully compliant.

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