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I represent a US Corporation (C Corp) which does business in…

I represent a US Corporation...
I represent a US Corporation (C Corp) which does business in Florida. We hired a contractor for a monthly fee of $3,000. Independent Contract Agreement signed between US Corporation and Contractor. Services where rendered in Florida. The US Corp has not intention to deduct this expense for the reason given below: As per the Contractor request, payments were processed in the following manner: - Payment was made by one of our related parties outside USA (OFFCO); that is a company that is not domiciled in USA, and does not dov business in USA. OFFCO has a Bank Account in a US Bank (For Bank and FATCA Purposes it is categorized as an Active NFFA; relevant W8 and other information is held by the bank and may be provided upon request). - We paid the contractor via check from OFFCO Account. Checks where on the name of a third party/Contractor’s relative (non US resident for immigration and tax purposes). Our questions: 1. Do OFFCO is subject to file form 1099-Misc? (the company does not even have an EIN number and does not need to obtain one for any purpose). Does the obligation fall fo US Corporation instead? Considering the independent contractor agreement signed? 2. Does OFFCO have to furnish an statement to the contractor? Or US Corp? Or none of them? Thanks in advance.
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3/21/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,191
Experience: 15years with H & R Block. Divisional leader, Instructor
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Customer reply replied 3 months ago
Thanks a lot.
Customer reply replied 3 months ago
I believed you helped me before.

1. Do OFFCO is subject to file form 1099-Misc? (the company does not even have an EIN number and does not need to obtain one for any purpose). Does the obligation fall fo US Corporation instead? Considering the independent contractor agreement signed?

The form 1099MIS is a US document and used by US entities to report payments made to US persons for payments that are US sourced. The foreign company is not required to issue a 1099MISC. The US company would issue a 1099MISC as they contracted the non employee.

2. Does OFFCO have to furnish an statement to the contractor? Or US Corp? Or none of them? Thanks in advance.

The 1099MISC would be issued to the non employee

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Yes, I did . I wish I had checked on that before I answered here

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Customer reply replied 3 months ago
Why? Is that a problem? I haven’t read your answer. One second

I was not rated on that one from 2016.

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Customer reply replied 3 months ago
Payments were not done to the contractor per se. They were made to a third party relative (her Father who is a non resident). How the US Company shall issue a 1099 Misc if what the company received was an invoice from OFFCO for payments made to the third party relative? Can you guide me from account recording perspective? I believe accountant offset and account payable US Company has with OFFCO by paying subcontractor relative.Summarizing, how US Co were to issue a 1099 Misc to Subcontractor if recipient of the monies was a third party non related to the agreement as per contractor request; that is, checks were issued to her father as per her request.
Customer reply replied 3 months ago
Oh. sorry, how can I fix that? I don't use this much.
Customer reply replied 3 months ago
I think I just did. Is that OK now?

The third party payment does not change the fact that payment was made to the contractor even if they designated a 3rd party to receive it. They cannot transfer compensation in that manner.

For federal income tax purposes, the doctrine of constructive receipt is used to determine when a cash-basis taxpayer has received gross income. A taxpayer is subject to tax in the current year if he or she has unfettered control in determining when items of income will or should be paid.

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26 CFR 1.451-2 - Constructive receipt of income. You authorized another to pay her and she authorized another to receive the income for her.

You are most welcome.
A positive 5 star rating is appreciated so I am credited for assisting. Scroll up to see STARS

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You posted "Oh. sorry, how can I fix that? I don't use this much." You scroll up and click on the stars (1 lowest 5 highest)

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Customer reply replied 3 months ago
Okay. Understood. What if the agreement was signed by OFFCO instead? That is a non us company paying a third party. From what I understood non us companies are not obligated to issued US forms/documents such as 1099-Misc.

A non US company does not issue a US document to a contractor.

Thanks again

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Just checking to see if you responded again.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,191
Experience: 15years with H & R Block. Divisional leader, Instructor
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Customer reply replied 3 months ago
Thanks! I believe we covered all!
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