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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2833
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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Our company is a IT (Information Technology) Support company

Customer Question

Our company is a IT (Information Technology) Support company based in California. Company deals with 3 different IT Professional individuals that are based in a country in the middle east (Jordan) to provide all services offered by the company to its clients. The company’s share of all provided services is 10%, the rest is billed by the three individuals to the company by three different invoices on a monthly basis. The billed money is then wired to the three individuals to their personal bank accounts abroad. The company will have a service contract with each one of the 3 individuals.
Questions:
- Are there any legal issues with doing that ?
- We assume that the company’s expenses = Administrative expenses like insurance and office running cost + 90 % paid to the 3 individuals for their services, is that correct?
-We assume that we will be paying taxes for the net profit (total income - expenses), is that correct? In other words, we will not be paying taxes for the 90% paid to the consultants.
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.

Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

You are correct that your company will pay taxes on its net income, which is gross income minus expenses. Your payments to the individuals based in Jordan for their services are expenses as well as any other expenses that are reasonable and necessary to operate your business. You are required to obtain a W-8BEN from each individual located in Jordan for your files as proof that they are foreign individuals who are performing the services outside of the U.S., and no taxes are required to be withheld from their payments. Form W-8BEN does not get sent to the IRS.

https://www.irs.gov/uac/Form-W-8BEN,-Certificate-of-Foreign-Status-of-Beneficial-Owner-for-United-States-Tax-Withholding

Please let me know if you require further information or clarification.

Thank you and best regards,

Barb

Expert:  Barbara replied 1 year ago.

Just following up with you to see if you have any other questions. If so, please come back to me here at your convenience, and I will be happy to assist you. If not, please take a moment to rate my answer since that is the only way I receive credit for answering you and alerts Just Answer to compensate me for a portion of the fee you previously paid.

Best regards,

Barb