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I plan to pay an overseas person for some IT work. Since the

work is being performed oversees...
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?
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Answered in 15 minutes by:
5/1/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,131
Experience: Taxes, Immigration, Labor Relations
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LEV :

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 - www.irs.gov/pub/irs-pdf/fw8ben.pdf

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,131
Experience: Taxes, Immigration, Labor Relations
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