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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29522
Experience:  Taxes, Immigration, Labor Relations
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I plan to pay an overseas person for some IT work. Since the

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I plan to pay an overseas person for some IT work. Since the work is being performed oversees, and they are not a US citizen, nor do they have a ssn, will I need to send them a 1099 at the end of the year? Would I just list their expense as "Contract Labor" on my books?


Hi and welcome to Just Answer!

Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U.S. trade or business.

See IRS publication 519 - page 12 - Table 2-1. Summary of Source Rules for Income of Nonresident Aliens - as we see Business income from Personal services is sourced Where services performed - thus is IT services are performed in a foreign country - the compensation received for these services is not income from US sources and is not taxable in the US.
Therefore - such compensation is not subject of reporting on 1099MISC and is not subject of withholding.
If that is a contract with an individual related to your business - you deduct such expenses as contract labor as you suggested.
You are expected to keep a proof that (1)the individual is a nonresident alien and (2) services were performed in a foreign country.
Generally - as a payer - you are classified as a withholding agent. You need to collect a signed form W8BEN -

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