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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Hi. Im located in the US, and Im working with someone in

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Hi. I'm located in the US, and I'm working with someone in Canada. We're doing microsoft xbox independent games. My question was this. The person in Canada is the CEO and should receive all the funds. But what if I used my bank to receive all the funds from microsoft... then transferred all the money to my Canadian colleague using paypal. Reason being that he's applied for an ITIN but it still hasn't come through... since I'm in the US receiving the funds from Microsoft is easier.

How will this affect me tax wise? What will I have to report? Is there a way to do this so that I don't have a tax liability?
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Since you would be receiving the funds, Microsoft would need a W-9 from you and then they would issue the 1099 to you. At the end of the year, you would show income and then an expense in the amount that you sent to your Canadian counterpart. However, your canadian counterpart needs to fill out a W-8BEN for you and you need to either 1)withhold 30% of the funds from his payment or 2) ensure that the Canadian counterpart meets the requirements of a tax treaty etc etc etc. You shouldn't do this without the ITIN in place.

The botXXXXX XXXXXne is no matter who is sending the money, the Canadian counterpart needs the ITIN to do everything correctly. Unless you are willing to foot the tax bill at the end of the year, your Canadian counterpart needs to just patiently await their ITIN and get the funds directly from Microsoft.

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