You can hire an independent contractor who has an ITIN. An Individual Taxpayer Identification Number is issued by the IRS to people who need to file or be reported on a U.S. tax return but don’t qualify for a Social Security number, and it’s a valid identifier for contractor tax reporting. The legal question isn’t really the hard part. What trips businesses up is picking the right intake form, applying the correct withholding, and meeting the new 2026 filing threshold on Form 1099-NEC.
Why the Hire Itself Is Legal
Form I-9 employment verification applies to employees, not to independent contractors. The USCIS handbook lists independent contractors among the categories of workers for whom employers do not complete Form I-9.1USCIS. 2.0 Who Must Complete Form I-9 Because a contractor is self-employed, work authorization isn’t something you verify on your side of the relationship. Your obligation is tax reporting.
An ITIN itself does not authorize anyone to work in the United States and doesn’t change immigration status.2Internal Revenue Service. Individual Taxpayer Identification Number (ITIN) It’s a tax-processing number. For your purposes, it functions as the taxpayer identifier you’ll put on the information return at year-end.
Which Form to Collect Before the First Payment
Not every ITIN holder gives you the same form. The right one depends on whether the contractor is a U.S. resident alien or a nonresident alien for tax purposes, and that distinction drives everything that follows.
Resident Aliens: Form W-9
A contractor who is a U.S. resident alien — someone who meets the substantial presence test or holds a green card — fills out Form W-9 and provides their ITIN on that form.3Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024) From there, you treat the contractor like any other domestic payee.
Nonresident Aliens: Form W-8BEN, Sometimes Form 8233
A nonresident alien contractor provides Form W-8BEN instead, establishing foreign status. This is where withholding enters the picture. Payments for personal services performed in the United States by a nonresident alien are generally subject to 30% withholding.4Internal Revenue Service. Pay for Personal Services Performed Where the contract was signed and where you send payment don’t change that.
If the contractor’s country has an income tax treaty with the United States, they may qualify for a reduced rate or full exemption on personal services income. To claim it, they file Form 8233 with you, reporting their ITIN and certifying treaty eligibility.5Internal Revenue Service. Claiming Tax Treaty Benefits Without that documentation on file, the 30% comes out, and the IRS can pursue you for any amount you failed to withhold.
Backup Withholding at 24%
If a contractor doesn’t provide a valid taxpayer identification number on Form W-9, or if the IRS notifies you that the ITIN you have is incorrect, you must withhold 24% of every payment.6Internal Revenue Service. 2026 Publication 15 This backup rule applies to U.S. persons, including resident aliens. Nonresident aliens fall under the separate 30% regime instead.7Internal Revenue Service. Tax Withholding Types
Backup withholding is avoidable. The contractor gives you a properly completed W-9 with a valid ITIN, and you don’t withhold. If they can’t or won’t, you must. Skipping this exposes you to liability for the amount you should have withheld, plus penalties.
Filing Form 1099-NEC Under the 2026 Threshold
The reporting threshold has changed. For payments made after December 31, 2025, you’re required to file Form 1099-NEC only when total payments to a contractor reach $2,000 or more in a calendar year, up from the old $600 threshold. The change was enacted under P.L. 119-21 and will be adjusted for inflation beginning in 2027.8Internal Revenue Service. Form 1099 NEC and Independent Contractors
The 1099-NEC reports nonemployee compensation using the ITIN from the contractor’s W-9. Both the IRS copy and the contractor’s copy are due by January 31 of the following year, and there’s no extended due date for electronic filers on this form.9Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC If January 31 falls on a weekend or holiday, the deadline moves to the next business day.
Payments below the $2,000 threshold still count as income to the contractor, who reports them on their own return. The threshold only governs your filing obligation.
Classification: The Bigger Risk Behind the Paperwork
All of this assumes the person really is an independent contractor. If the IRS looks at the relationship and concludes you had an employee, none of the contractor tax treatment holds up. The agency weighs three categories of evidence.10Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
- Behavioral control. Do you direct what work gets done and how? Setting hours, tools, and step-by-step methods looks like employment.
- Financial control. Does the worker invest in their own equipment, serve other clients, and stand to profit or lose? Flat pay with all expenses reimbursed points the other way.
- Relationship type. Is there a written contract? Are there benefits like insurance or paid leave? Is the work a core ongoing function of your business or a bounded project?
Misclassification is where the cost stacks up. If the IRS reclassifies your contractor as an employee, you can be held liable for the employment taxes you should have withheld and paid, including the employer’s share of Social Security and Medicare and federal income tax withholding.11Internal Revenue Service. Worker Classification 101: Employee or Independent Contractor The worker’s immigration status or type of taxpayer ID doesn’t change this analysis.
What Happens if the ITIN Has Expired
An ITIN that hasn’t been used on a U.S. federal tax return for three consecutive years expires on December 31 of that third year.12Internal Revenue Service. How to Renew an ITIN For your reporting, an expired ITIN can still be used on Form 1099-NEC. The contractor only needs to renew if they plan to use it on their own tax return. Worth mentioning to them, though, because without renewal they can face processing delays, lost credits, and penalties on their own filing.
Penalties for Skipping the 1099
Per-form penalties for late or missing 1099-NEC filings escalate with delay: $60 per form up to 30 days late, $130 through August 1, $340 after that or if never filed, and $680 for intentional disregard.13Internal Revenue Service. Information Return Penalties These apply separately to the IRS copy and the contractor’s copy. A handful of missed forms can add up to thousands of dollars quickly, before you factor in any backup withholding liability.
Collect the correct form before the first payment, not after. Keep copies of completed W-9s, W-8BENs, and payment records for at least four years, which covers the standard audit window. If you can’t tell whether a contractor is a resident or nonresident alien, ask, because the answer decides whether you withhold nothing, 24%, or 30%.