Do I need to fill out form 1042-S/1042 for contracting an individual contractor in the Philippines to do email customer service work? Or is a W-8BEN good enough?

Yes, you will still need to issue a Form 1042 (s) to your contractor.  

 

Per Instructions for Form W-8BEN-E, your contractor is the one supposed to provide you with the Form W-8BEN, the person from whom he or she receives the payment.  For more information, click here https://www.irs.gov/pub/irs-pdf/iw8bene.pdf, page 3 under "When to provide Form W-8BEN-E to the withholding agent"

 

As far as the Form 1042 (s), you as the withholding agent is supposed to issue the form to the contractor so that he or she can file their US taxes based on the information from the form. For more information, click here: https://www.irs.gov/individuals/international-taxpayers/who-must-file

Thank you for your response. Is this true even when all services are performed outside the US? 

 

Ref: https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/do-i-have-to-prepare-a-1099-misc-for-a-foreign-contractor-who-performed-services-related-to-a/00/32212/amp

 

TurboTax software doesn't seem to guide businesses through any of this. 

The nonresident contractor needs to complete a Form W-8BEN which states that he is not a US person.  This you keep with your records in case you are ever audited.

 

As a general rule, wages earned by nonresident aliens for services performed outside of the United States for any employer are foreign source income and therefore are not subject to reporting and withholding of U.S. federal income tax.

 

Foreign Source Income- Form 1042-S Reporting Not Required

 

Please see IRS Publication 515, Withholding of Tax on Nonresident Aliens.