1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

[ask] outsourcing and taxes

Discussion in 'Business & Tax Advice' started by mikey29, Jan 13, 2009.

  1. mikey29

    mikey29 Junior Member

    Joined:
    Feb 19, 2008
    Messages:
    167
    Likes Received:
    106
    I am trying to figure my overall profits, from outsourcing and the things I do. I mostly outsource ac, but I also do other outsourcing for my blog (I am lazy).

    If I pay someone a dollar to write a article and I make 3 dollars of it. Do I pay taxes on the 3 dollars or the the 2 dollars (3-1=2).

    another question I got, if I used somebody from a place like India alot, say 200-500 dollars a year, I dont have to pay his tax too, do I.

    Please speak simple easy to understand English, no mumble jumbo
     
  2. Uncle Kracker

    Uncle Kracker Registered Member

    Joined:
    Sep 15, 2008
    Messages:
    89
    Likes Received:
    184
    Location:
    Detroit
    Your payments to others are your business expenses, assuming you have some type receipt/record for it. (3-1=2) is correct.

    If you pay out $600.00 US (or more) you will need to provide that person/business with a 1099 form, this will be your receipt/record of your expense.
    Code:
    http://www.irs.gov/pub/irs-pdf/f1099msc.pdf
    Code:
    http://www.irs.gov/pub/irs-pdf/i1099msc_07.pdf
    You're not responsible for their taxes if have a legitimate independent contractor relationship. You probably do.
    Code:
    http://www.irs.gov/faqs/faq/0,,id=199637,00.html
     
    • Thanks Thanks x 1
  3. Freddie

    Freddie Registered Member

    Joined:
    May 16, 2008
    Messages:
    62
    Likes Received:
    13
    Would that also apply if a US person or business pays someone who is not a US resident or citizen?

    I am guessing it doesn't <!!insert disclaimer here!!>
     
  4. Uncle Kracker

    Uncle Kracker Registered Member

    Joined:
    Sep 15, 2008
    Messages:
    89
    Likes Received:
    184
    Location:
    Detroit
    I wanted to find out about that myself so I called the IRS. According them, the US person or business cannot use the the 1099 form in that situation and the US person or business is not required to provide the non-citizen/business with any forms.

    I asked if the electronic receipt of payment (G**gle/Pay*Pal, etc.) was good enough to back up the expense and they told me they have to give me a decision on that. So I'll have their answer in a couple of weeks. :unitedsta
     
    • Thanks Thanks x 1
  5. Uncle Kracker

    Uncle Kracker Registered Member

    Joined:
    Sep 15, 2008
    Messages:
    89
    Likes Received:
    184
    Location:
    Detroit
    In true IRS fashion they didn't answer the question I asked, but here is the response from IRS. It may clear up some other questions on foreigners earning income from the U.S.

    Income paid to a nonresident alien (NRA) in exchange for services performed outside the United States is considered to be the foreign source income of a nonresident alien (cf. Internal Revenue Code (IRC) section 862(a)(3)). This is true even though the payor of the income is a resident of the United States. Such income is not taxable by the United State under IRC 872(a). In addition, such income is not subject to withholding of U.S. federal income tax under section 1441(a) of the IRC. Such income is not reportable to the Internal Revenue Service (IRS) on Form 1042-S under the regulations under IRC 1461; and is not reportable to the IRS on Form 1099 under IRC 6041. The NRA recipient of this income is NOT required to report this income on a U.S. federal individual income tax return under IRC 6012. The NRA recipient of this income should provide Form W-8BEN to the payor of the income in order to inform the payor that the recipient is a nonresident alien who is not subject to U.S. taxation of foreign source income.
     
    • Thanks Thanks x 1