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Matthew Breecher
Matthew Breecher, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 286
Experience:  Director
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I run a UK business selling online in USA. I do not pay

Customer Question

Hi
I run a UK business selling online in USA. I do not pay taxes in the USA because I am a foreign corporation.However, I have a USA based, freelance employee. Could this be deemed as doing business in the USA and make me liable for US taxes?Is there a maximum number of hours this person can work for me?
Submitted: 5 months ago.
Category: Tax
Expert:  Matthew Breecher replied 5 months ago.

Hello, I would like to answer your question. Give me a few minutes to draft a response.

Expert:  Matthew Breecher replied 5 months ago.

This question is rather complex. Have you evaluated the "independent contractor" criteria set forth by the IRS? Does this employee meet that criteria?

Customer: replied 5 months ago.
I read the 'Common Law Rules' here: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employeeHowever I find them to be rather complex and unclear. However, under 'type of relationship' I can say that the person does not have written contracts or employee type benefits
Expert:  Matthew Breecher replied 5 months ago.

There are a few more critical questions, for instance: (1) do you set their working hours, (2) do you oversee the quality of their work, (3) do they have other income or do you prohibit them from performing other work? If you can describe the relationship I can provide a better more detailed assistance..

Customer: replied 5 months ago.
Thanks
This person provides acts as a freelance personal assistant. Her hours are totally flexible though I pay her a set retainer each month for her services. I don't know if this person has another income but they are not prohibited from carrying out other work. I am afraid I am not 100% sure what 'overseeing work' actually means.Regards
Phil
Expert:  Matthew Breecher replied 5 months ago.

I understand the difficulty. In fact, it is highly subjective and even we as professionals have trouble making this determination. Some professionals can be deemed "independent contractors" by definition as established by the US Internal Revenue Code (IRC); for instance, real estate agents. In your example, if your assistant has flexibility in her work, makes her own hours, makes decisions without necessarily contacting you, there is a strong argument for an "independent contractor" status. Additionally, even if the IRS disagreed, you are not a resident nor citizen of this country (unless you omitted that information), which means the IRS would have a difficult time even holding you liable for any employee/employer relationship.

...

So, to answer your question... (1) There does not appear to be enough oversight, financial or behavioral, for me to say this person is clearly an employee. (2) There are no maximum or minimum number of hours which this person can work, or which create an employee/employer relationship; hours do not create that relations, rather the nature of work performed establishes that relationship.

Customer: replied 5 months ago.
Thanks
I am definitely not a US resident. She does report her hours, and they tend to be regular but she does not have maximum/minimum. And yes, she does make decisions without necessarily contacting me.
Also, I don't know if it matters but she works largely from home (not from any company premises).Thanks
Expert:  Matthew Breecher replied 5 months ago.

Where she works is not relevant. What would be relevant is if you paid for her training, provided her a laptop, paid for any specialized tools, etc... If she works remotely using her own resources, that just furthers her classification as an independent contractor.

Expert:  Matthew Breecher replied 5 months ago.

I hope I answered your question with sufficient detail, accuracy, and completeness based on the facts communicated. I would be happy to expand my answer should you need clarification; before you rate my answer. Accordingly, please rate my answer, based on thoroughness and accuracy, rather than any good or bad news/content. We (the experts) are only compensated when an answer is accepted and rated. I appreciate your prompt response. Sincerely, ***** ***** Breecher, CPA.

Expert:  Matthew Breecher replied 5 months ago.

I wanted to follow up and see if you need further information. If I have provided you with a sufficient response, please rate my answer as we are only compensated for our time of we receive a 3 to 5 star rating. I would be happy to expand on my response as your satisfaction and a 5 star rating is my goal.