Pay Foreign Independent Contractor Without Supervision In Wake
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Foreign vendors do not complete the Substitute Form W-9; foreign persons or entities must submit one of five available forms. The vendor must determine the one most appropriate to their United States tax status for reportable transactions.
Form 1042-S: If your business pays a foreign contractor for services performed within the United States, and the income is U.S.-sourced, you must file Form 1042-S to report these payments to the IRS.
Form 1042-S: If your business pays a foreign contractor for services performed within the United States, and the income is U.S.-sourced, you must file Form 1042-S to report these payments to the IRS.
Conversely, if the independent contractor is not a US person and did not perform any of their services within the US, you will not be required to issue Form 1099. Instead, the foreign contractor will have to complete and file Form W-8BEN.
There are two ways of reporting Copy A of the 1099-MISC: Snail mail: Mailing your IRS form is the traditional way of paper filing. Online: You can now submit 1099 forms via the IRS's online submission service, the Filing a Return Electronically (FIRE) system.
Form W-8BEN or W-8BEN-E: Foreign contractors who are not U.S. citizens and have earned US-sourced income or performed work within the United States must provide Form W-8BEN (for individuals) or Form W-8BEN-E (for business entities).
The IRS requires a flat 30% withholding on ALL types of payments to foreign national individuals UNLESS: The individual has a U.S. tax identification number (SSN or ITIN) and qualifies for a tax reduction under the tax treaty between the U.S. and their country of tax residency.
It is important to note that foreign independent contractors must comply with the immigration laws and regulations of the country where they are providing their services. They may need to obtain work permits or visas to legally work in the United States or any other country where they are contracted.
Employers are required to check the work authorization of employees and can face fines and penalties for failing to do so or for hiring employees who they know do not have work authorization. All immigrants regardless of legal status are able to earn a living as independent contractors by using an ITIN number.
Today, it's possible to hire independent contractors from any part of the world, thanks to improvements in technology and communications. It's a great idea to consider Mexico if you're looking to expand your team. Its proximity and strong economic ties to the US are definite advantages.
