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jpitts1519
New Member

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Also, for the other 4 I subcontracted work out to that ARE US Citizens, do I send them 1099s or how do I include that as well on my income taxes and what info will I need to report their subcontracted work I paid them for via paypal? I was told by the Canadian subcontractor her accountant told her she does not need to fill out the w-8ben and it would not work because she was performing services outside of the US and it was digital subcontracted work, and she's not actually performing services in the US.  

13 Replies
Carl
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

What kind of business do you own? A single-member LLC? Sole proprietorship? S-Corp? C-Corp? Partnership? Multi-member LLC? Did *you* sub-contract the work out? Or would it be more accurate to say your business sub-contracted it out?
jpitts1519
New Member

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Oh yes! I'm a single member llc and my business sub contracted the work out to her and 4 other US sole proprietors if that makes sense. My work is a private editor and we transfer files back and forth electronically for jobs to be finished.
Carl
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Let's start by seeing if a 1099-MISC is even required. Did you pay the person more than $600 total in 2017? Also, was the payment to an actual person, or was the check payable to a business that person may own or work for?
VolvoGirl
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

@Carl  do you mean 2018?
Critter
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Critter
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

same answer for sub contractors in your situation ... use the W-8BEN
jpitts1519
New Member

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

It was for 2018 and I just started sending sub contracting work out. They are all sole proprietors, and one is an llc as well. They were all over $600. One closer to 4-5k, another two 2k (one of the 2k in payments was to the Canadian, and another right at 600.
Critter
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Send each and everyone a 1099 to CYA.
jpitts1519
New Member

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

I can't send a 1099 to a foreigner doing work for me out of the country?
Critter
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Oh yeah ... getting tired.
Opus 17
Level 15

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

I don't know all the exact rules on this, but in general:

First, if you make payments to foreign persons or corporations and don't have their tax information on a form W-8, you are required to withhold 30% for taxes.  You would issue a form 1042-S to the payee, withholding 30% which you send to the IRS.  The vendor gets that withholding back if they file a proper non-resident income tax return.  (The mandatory withholding requirement is to "encourage" foreign persons to file US tax returns for US-sourced income.)

To avoid mandatory withholding, the payee/vendor must give you the correct form W-8BEN (there are several versions depending on if they are a sole proprietor, a corporation, or something else.). See generally here https://www.irs.gov/pub/irs-pdf/iw8.pdf

If you have the correct form W-8BEN for the payee, you don't need to withhold tax and you don't need to issue a 1099-MISC.  You keep the W-8BEN in your records to show to the IRS (if audited) why you did not withhold tax on payments to this foreign person.

If you don't have form W-8BEN for your foreign payees (and don't get them soon), and didn't withhold the mandatory 30%, you may have a serious compliance problem and I would suggest meeting with a tax expert to review the rules so you can get yourself out of trouble and prevent getting into new trouble.

See also this https://www.irs.gov/publications/p515

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
terriderkum
New Member

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

Thanks for your clarification.   I had a W-8BEN and did not withhold as is the rule.  Just out of curiosity, how then does the Foreign person report their US income?  Do I file anything that the IRS can reconcile with the Foreign person?

DaveF1006
Employee Tax Expert

I subcontracted about 2k of work out to a Canadian and paid via Paypal. Where/what info do I need from her to file that on my taxes if she's not a US citizen to 1099 her?

A foreign citizen reporting their US based income would report their income on a 1040 NR form to the IRS. Whether they file this or not is up to their discretion.The only reporting tool available for you is the 1099 Misc form because this would match up with the information reported in the 1040 NR form filed with the IRS, if filed. 

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