Hi there,
I have my own company and no employees but contractors.
I have a contractor in the US and pay him every month. At the end of the year I will send him a 1099 detailing everything I have paid him for the current year.
I also have two contractors in India. I transfer money to them every month for work they have done for me. What do I need to do from a tax and compliance perspective for them, as I know 1099 does not work for international contractors?
Thank you in advance for your help.
You are only required to file form 1099-nec for those taxpayers with a US social security/ein. For others, simply keep track of your payments as Contract Labor.
I hope this is helpful to you.
Kelly C.
CPA
Dear Kelly C.
Thank you for getting back to me.
I can keep track of the contract labor. How do I ensure that I do not get taxed on that as revenue because I am paying my contractors?
Is their an equivalent to 1099 for them? How does the IRS keep track that I am paying them and so it is a cost for me?
Kind regards
The IRS does not keep track of your contract labor payments. Your are responsible for keeping track of these payments. When you complete your tax return, you will input the total for the year. If you are ever asked to provide substantiation for these payments, have a bank statement or some other evidence that supports these payments. I recommend you put a copy of these payments in a paper copy file and retain in your records.
I hope this is helpful to you.
Kelly C.
CPA
Dear Kelly C.,
Thank you for your feedback, that is very helpful.
I have invoices for the services performed by the international contractors, so hopefully that can be used as a reference for payments made.
Take care and Happy Holidays!
Kind regards
Is 1042s and 1042 needed in this case ? Have similar situation as described .
Form 1042 would only appy if you were required to withhold taxes on compensation paid to a foreign worker. That might occur if you received a notice from the IRS to do backup withholding on an individual, for instance. Those situations are not common, most likely you don't need to do that.
You can learn more by using this link: Form 1042 withholding agent