I have an LLC with my spouse and we pay royalties to artists that license out their work for us to re-sell. Not all of our artists are from the United States. I understand for the United States royalties of $10 or more require us to create a 1099 for the artists. My question is for the international artists is there a form we need to furnish? My reason for asking is I want to deduct the royalty expenses but I'm not sure if there is a form that needs to be filed in order to do so.
In case any one else runs in to a similar question. I went through a bunch of different IRS docs explaining what needs to be done. There is a Publication 515 which details how much taxes are to be withheld depending on the type of income paid to foreign individuals or entities. Then I found each treaty from the countries we have artists in who we pay royalties to for their work. The treaties typically state withholding is 0% but some only change the default withholding for royalty income from 30% to something less. Finally, there are forms 1042 and 1042-S. The form 1042 helps you fill out 1042-S which is the one you would file and the one you would give a copy to to all foreign individuals even if no taxes were withheld. Hopefully this helps any one else in the future.
You would furnish the same form to your artists that work out of country if you have a federal ID number that would allow you to do so. Otherwise, you don't need to furnish a form to them. Even if you don't furnish the reporting form, you can deduct the payments on your tax return.
Would you happen to know what form that would be or is it different depending the country they are in?
The form you would issue is the same 1099-Misc. There is no specific form that you would issue an international artist.
They are not in the U.S. From my understanding 1099's are only for U.S. contractors not foreign. That's why I was wondering if there are any other forms. Probably would do good for me to check each of their country's tax forms.
In case any one else runs in to a similar question. I went through a bunch of different IRS docs explaining what needs to be done. There is a Publication 515 which details how much taxes are to be withheld depending on the type of income paid to foreign individuals or entities. Then I found each treaty from the countries we have artists in who we pay royalties to for their work. The treaties typically state withholding is 0% but some only change the default withholding for royalty income from 30% to something less. Finally, there are forms 1042 and 1042-S. The form 1042 helps you fill out 1042-S which is the one you would file and the one you would give a copy to to all foreign individuals even if no taxes were withheld. Hopefully this helps any one else in the future.