Do US companies send a 1099 to a Canadian contractor?

A Canadian working from Canada is outside the 1099 system

The 1099-NEC is the slip a US business issues to report non-employee compensation paid to a US person. A US payer decides who is a US person from the tax form it collects before paying: a W-9 from US persons, a W-8 series form from everyone else. When you give a US client a Form W-8BEN as an individual or a W-8BEN-E for your corporation, you have certified that you are not a US person, and the client has no 1099 to issue.

The second half of the rule is about where the work happens. Compensation for services is US-source only to the extent the services are performed inside the US. A developer in Brampton writing code for a client in Austin is earning foreign-source income in the eyes of the IRS, which is neither taxable in the US nor subject to US withholding, and the payer has no reporting obligation for it at all. Our answer on what Form W-8BEN is covers filling it in; the short version is that you keep a copy, the client keeps the original, and nothing goes to the IRS.

The same logic covers payment processors. Stripe, PayPal and marketplace platforms issue Form 1099-K to US persons who cross the reporting threshold, but a Canadian account holder who has completed the platform's W-8BEN interview is documented as foreign and receives no 1099-K, even when every customer paying through the account is in the US.

Do not sign a W-9 to make a client's onboarding system happy. The W-9 certifies US-person status, which is false for a Canadian resident, and it puts you on the path to a 1099 and to backup withholding if the client cannot match your number.

Work done inside the US turns on withholding and a 1042-S

The picture changes when you travel to the client. Days spent working on site in the US make that share of your fee US-source, and the client is then a withholding agent required to hold back 30% and report the payment on Form 1042-S unless you document a treaty exemption. For a sole proprietor the exemption claim is Form 8233, which needs a US taxpayer number, so an ITIN often has to be arranged first; we cover that in how to get a US ITIN from Canada. For a corporation the claim is made on the W-8BEN-E under the treaty's business profits article, on the basis that the company has no permanent establishment in the US.

A 1042-S is not bad news in itself; it is simply the slip that shows what was paid and what, if anything, was withheld, and any tax withheld is recoverable by filing a 1040-NR or credited on your Canadian return. What matters is planning the US days in advance rather than discovering the withholding on the first invoice. Regular on-site work also feeds the substantial presence day count and can raise the question of whether your corporation should file a protective Form 1120-F. Our answer on what a 1042-S is explains how the slip lands on your T1 or T2.

If a 1099 arrives anyway, correct the record rather than the return

US clients issue 1099s to Canadians for one of two reasons: they never asked for a W-8, or their accounts payable system defaults to a 1099 for any vendor without a W-9. The slip does not change the tax law. Income earned from Canada stays foreign-source and stays outside US tax, whatever the paperwork says. The practical steps are to send the client a completed W-8BEN or W-8BEN-E, ask for the 1099 to be voided or corrected, and keep the email trail with your invoices for that year.

One version needs attention. If the client applied backup withholding because it had no taxpayer number for you, that money sits with the IRS, and getting it back means obtaining an ITIN and filing a 1040-NR for the year. That is a slow and avoidable route, which is why the W-8 belongs in your onboarding pack before the first invoice goes out.

Keep a simple pack ready for every new US client: the signed W-8 form, an invoice template showing your Canadian address and HST number, and a one-line note that you are a non-US person performing the services from Canada. Clients who receive that on day one almost never issue a 1099 by mistake.

On the Canadian side it is ordinary business income, usually with zero-rated HST

Every dollar from the US client is taxable in Canada. A sole proprietor reports it on form T2125 with the T1; a corporation reports it on the T2. Convert each receipt at the Bank of Canada rate on the day it was received, or use the annual average where income arrives steadily through the year, and expense the wire and conversion fees. We explain the bookkeeping in how to record USD transactions in Canadian books.

GST/HST follows the client, not the currency. Most services supplied to a non-resident business that is outside Canada are zero-rated exports, so you charge 0% on the invoice, but those sales still count toward the $30,000 small supplier threshold and, once registered, you recover the HST on your own software, equipment and professional fees through input tax credits. Keep the client's US address and evidence of non-residence on file, and watch the exceptions — services connected with real property in Canada or delivered to someone while they are physically in Canada are not zero-rated. Our answer on charging GST/HST to US customers goes through those cases.

If you operate through an Ontario corporation, the same receipts land on the T2 as active business income eligible for the small business deduction, and the corporation is the party that signs the W-8BEN-E and registers for HST. Keep the contract in the corporation's name and have the client pay the corporate account; a contract in your personal name paid into a corporate account invites questions on both sides of the border.

How we handle Canadian contractors with US clients

We set up the paperwork once so the tax follows automatically: the right W-8 form for your structure, HST registration and zero-rating on the invoice template, and a bookkeeping file that records US dollar receipts at the correct rate. Where a client wants you on site, we plan the days and the treaty claim before you travel. Consultants and developers can read how this fits their situation on our IT consultant cross-border tax page; everything is quoted as a fixed fee after a discovery call.

Source: IRS — About Form W-8 BEN.