1099 Reimbursements explained: Global contractor payments with Expensify

You've just discovered the perfect graphic designer for your new product launch. They're talented, affordable, and eager to start—but they're based in Barcelona while you operate from Boston. As you finalize the agreement, a crucial question emerges: How, exactly, will you handle payments and reimburse their project expenses across international borders?

This scenario is playing out in thousands of small businesses daily as the global talent marketplace expands. International contractors have transformed from occasional resources to essential business partners, with remote work platforms reporting a 63% increase in cross-border hiring since 2020. 

While tapping into global talent pools offers tremendous advantages, it also introduces complex payment challenges that can quickly turn your exciting new partnership into an administrative headache.

Understanding 1099 contractors and global workforce trends

A 1099 contractor (named after the tax form they receive) is a self-employed individual who provides services to your business but isn't on your payroll. They control how and when they work, often use their own equipment, and may serve multiple clients simultaneously. 

Understanding 1099 expenses and how they differ from employee expenses is crucial for proper accounting and compliance.

The rise of global distributed teams isn't just a pandemic-era trend—it's a fundamental shift in how work happens. Businesses gain several advantages when partnering with international contractors:

• Cost-effectiveness: Hiring contractors eliminates expenses like benefits, office space, and certain taxes

• Access to global talent: Find specialized skills that might be scarce locally

• Flexibility and scalability: Scale your workforce up or down based on project needs without long-term commitments

One common misconception is that reimbursing independent contractors works just like reimbursing employees. In reality, the process requires different approaches, especially when working across borders. Understanding these distinctions helps avoid compliance issues while building stronger contractor relationships.

The fundamentals of how to pay contractors internationally

Learning how to pay international contractors effectively starts with understanding the foundation of cross-border transactions. Whether you're figuring out how to pay overseas contractors for the first time or optimizing your existing process for paying a contractor in another country, the principles remain the same.

Global reimbursements involve paying back contractors for business-related expenses they incur while working for your company. 

What is a 1099 reimbursement, exactly? It's the process of repaying independent contractors for legitimate 1099 business expenses they've incurred specifically for your projects. These might include software purchases, travel costs, or equipment necessary for their work. 

Getting this right matters for several reasons:

• Maintaining good relationships with valuable talent

• Ensuring tax compliance in multiple jurisdictions

• Controlling costs through proper documentation

• Building a reputation as a reliable client in the global marketplace

Overview of payment methods for global contractors

When exploring how to pay international remote workers, you have several options, each with distinct advantages. The best method for how to pay remote workers often depends on your specific business needs and the contractor's location.

• International wire transfers: Direct bank-to-bank transfers offer security but often come with higher fees and slower processing times

• Payment platforms: Services like PayPal, Wise, and Expensify provide faster transfers with varying fee structures and currency conversion options

• Digital wallets: Options like Payoneer and Skrill offer convenient storage and transfer of funds across borders

• Cryptocurrency options: Some contractors prefer payment in cryptocurrencies for speed and reduced fees, though this approach brings additional complexity

Compliance considerations when paying overseas contractors

Navigating the compliance landscape requires attention to several key areas like:

• Tax implications: While you typically don't withhold taxes for 1099 contractors as you would for employees, you still need to report payments above certain thresholds

• Currency conversion challenges: Exchange rate fluctuations can affect both parties, requiring clear policies on who bears the risk

• Documentation needs: Proper record-keeping becomes even more crucial with international contractors, including contracts, invoices, and expense reports

Navigating 1099 reimbursements for international contractors

Understanding 1099 reimbursement processes is essential when working with global talent. So, what counts as a reimbursable expense for a 1099 contractor? Generally, reimbursable expenses are those that the contractor incurs specifically for your business—not their general business operations.

Note that there’s a distinction between compensation and reimbursement. Compensation is payment for services rendered, while reimbursement covers specific business expenses. This difference matters because reimbursements, when properly documented, aren't considered income for tax purposes.

Common reimbursable expenses in global contractor relationships include:

• Business travel: Trips to client sites, conferences, or meetings requested by your company

• Software and equipment: Tools purchased specifically for your projects

• Training and certification: Courses or certifications required for your work

• Client-specific expenses: Costs incurred solely for your business needs

Best practices for managing global contractor reimbursements

Establishing clear policies from the start prevents misunderstandings and builds trust with your international team members. Your reimbursement policy should address:

• Which expenses qualify for reimbursement

• Documentation requirements (receipts, explanations)

• Submission deadlines and approval workflows

• Currency conversion methods and timing

• Payment timelines

Creating an efficient workflow saves time and frustration on both sides. Here’s one approach:

1. Contractor submits expense with required documentation

2. Your team reviews and approves/rejects within a specified timeframe

3. Approved expenses are processed for payment

4. Contractor receives reimbursement in their preferred currency

Documentation requirements may vary by country, but generally include the following:

• Original receipts whenever possible

• Date and purpose of the expense

• Project or client association

• Local currency amount and conversion rate (if applicable)

Streamline global contractor payments with technology

Modern expense management platforms like Expensify have transformed what was once a manual, error-prone process into a streamlined operation. When considering how to pay contractors efficiently, these technology solutions offer several advantages. 

Key features to look for include:

• Multi-currency support: Handling different currencies without manual calculations

• Automated receipt processing: Instantly capturing and categorizing expense information

• Integration with accounting systems: Syncing data with your financial software

• Mobile accessibility: Allowing contractors to submit expenses from anywhere

• Tax compliance tools: Helping navigate complex international regulations

The cost-benefit analysis of implementing a dedicated solution typically shows significant advantages:

• Reduced administrative time 

• Faster reimbursement processing

• Improved accuracy and compliance

• Better contractor satisfaction and retention

How Expensify simplifies global reimbursements

Expensify transforms the chaotic process of global reimbursements into a seamless experience that feels almost magical compared to the “old” ways. The platform functions as your global financial command center, handling everything from initial receipt capture to expense reimbursement with intelligent automation at every step. 

Unlike traditional reimbursement methods that treat international transactions as exceptions requiring special handling, Expensify's architecture was built from the ground up with global workflows in mind. When a contractor in Tokyo submits an expense at 2AM your time, the system automatically processes the receipt, applies the appropriate policy rules, calculates the correct currency conversion, and queues the reimbursement for approval—all before you've had your morning coffee. 

This kind of friction-free global operation becomes possible through several key innovations:

• Automated currency conversion: No manual calculations or exchange rate research, with realtime rates applied transparently for both parties

• Streamlined workflow: From receipt capture to reimbursement approval, with intelligent routing that respects your approval hierarchies while eliminating bottlenecks

• Financial accuracy guarantees: Reducing errors and disputes through built-in compliance checks and automatic reconciliation

With bank accounts in 24 countries handling USD, CAD, GBP, EUR, and AUD (limitations of these currencies is only for withdrawal/business bank accounts – deposit bank accounts can be in just about any currency), Expensify offers truly global coverage for contractor payments and reimbursements. Key features include:

• Seamless cross-border payments in local currencies

• Efficient tracking and reporting across regions

• Next-day availability options for faster access to funds

• Centralized reimbursement management for easy oversight

• Integration with global accounting packages including Xero, Sage Intacct, NetSuite, and QuickBooks

Time expectations vary by currency and region, but most reimbursements process within one to three business days. Understanding the difference between "approved" status (ready for payment) and "reimbursed" status (payment completed) helps manage contractor expectations effectively.

Overcoming common challenges with international contractor reimbursements

Working across borders brings unique challenges that require thoughtful solutions, such as:

• Different time zones: Schedule regular check-ins that work for both parties and use asynchronous communication tools

• Currency fluctuations: Consider building small buffers into budgets or specifying when exchange rates are calculated

• Documentation variations: Create clear guidelines that accommodate different receipt formats while meeting your compliance needs

• Policy consistency: Develop core policies that apply globally with specific adaptations for regional requirements

• Fraud prevention: Implement verification steps without creating unnecessary friction for legitimate expenses

Future trends in global contractor payments and reimbursements

The world of international payments isn't standing still—it's racing forward with innovations that promise to reshape how businesses connect with global talent. Keep an eye on these game-changing developments:

Digital currencies go mainstream: Beyond Bitcoin, stablecoins and central bank digital currencies are gaining traction for cross-border payments. These technologies offer faster transfers with reduced fees, making it easier to pay contractors anywhere without the traditional banking delays. Companies using stablecoins for international payments are already seeing transaction times reduced from days to minutes.

AI transforms expense verification: Smart systems now instantly translate foreign receipts, categorize expenses, and flag potential issues automatically. This technology dramatically reduces manual review time while improving accuracy, even across different languages and receipt formats. The days of puzzling over handwritten taxi receipts from Shanghai are quickly becoming a thing of the past.

Compliance becomes smarter: Rather than a confusing patchwork of regulations, we're seeing more standardized international frameworks emerge. While requirements are becoming more comprehensive, modern platforms can automatically adjust to compliance needs based on contractor location, simplifying what was once a major headache for businesses.

Work and payment platforms converge: The separation between project management, communication, and payments is disappearing. Next-generation platforms integrate these functions into unified workspaces where global teams collaborate and process payments within a single ecosystem—eliminating the friction between separate tools and creating seamless workflows for distributed teams.

The bottom line

The way you handle international contractor payments isn't just administrative—it's strategic. Knowing how to pay contractors efficiently across borders can become a competitive advantage for your business. 

By implementing modern solutions like Expensify that handle both payments and 1099 expenses, you transform what was once a frustrating process into a streamlined operation that helps you attract global talent, maintain compliance, and scale your business internationally. 

Ready to simplify your global payments?

FAQs about how to pay global contractors

• Can I reimburse 1099 workers in Expensify?

  Yes, Expensify supports reimbursements for 1099 contractors, both domestic and international. You can add contractors as members, allowing them to submit expenses directly through the platform while maintaining appropriate separation from employees.

• How do you pay overseas contractors?

  The most efficient methods include international payment platforms like Expensify, PayPal, or Wise; wire transfers for larger amounts; or digital wallets that support multiple currencies. The best choice depends on your contractor's location, frequency of payments, and preferred currency.

• Do you issue a 1099 for a reimbursement?

  Generally, no. Properly documented reimbursements for business expenses aren't considered income and don't require a 1099 form. However, if reimbursements aren't well-documented or include personal expenses, they may be considered compensation and require reporting.

• Can you reimburse an independent contractor for expenses?

  Yes, you can reimburse contractors for legitimate business expenses incurred specifically for your projects. Clear documentation is crucial to ensure these payments aren't considered taxable income for the contractor.

• What is a 1099 compensation?

  1099 compensation refers to payments made to independent contractors for their services, reported on IRS Form 1099-NEC (formerly 1099-MISC). This includes fees, commissions, and other payments for services, but not properly documented reimbursements.

• How do I avoid misclassifying an international contractor as an employee?

  To avoid misclassification, ensure your contractors maintain independence in how they perform their work, serve multiple clients when possible, use their own equipment, and work without direct supervision. Document the relationship with a clear independent contractor agreement.

• How do I comply with GDPR when paying international contractors?

  Ensure your payment processes include proper data protection measures, obtain necessary consent for data processing, maintain transparency about how you use contractor data, and provide mechanisms for contractors to access and correct their information.

• Do I need to withhold taxes when paying a foreign contractor?

  Generally, U.S. companies don't need to withhold taxes when paying foreign contractors who perform all work outside the United States. However, you may need to file Form 1042-S for certain payments. Consult with a tax professional familiar with international tax regulations.

• Can I pay a foreign contractor with a credit card?

  Yes, credit card payments are often convenient for smaller amounts or regular service fees. However, consider the foreign transaction fees and currency conversion rates, which may make this method more expensive than alternatives for larger payments.

• What are the best platforms for paying international contractors?

  The best platforms include Expensify for comprehensive expense management and payments, Wise (formerly TransferWise) for competitive exchange rates, PayPal for wide global acceptance, and Payoneer for contractors in regions with limited banking options. The ideal choice depends on your specific business needs and contractor locations.