Taxes on Outsourcing?

I believe its anything more than $400 you are supposed to pay taxes on.

I dont think you have to do anything for that amount, but you need to look to see at what point you have to file a 1099 for them.

But if they have their own company then you dont have to file anything. Like if you spend $10,000 on google adwords, you write that off as advertising and dont send anything in.

I thought it was $600.
(of course if they are in another country, then that countries laws apply)

If I'm understanding your question correctly, whatever you pay to writers is income to them no matter what the amount is. If it's $50, they would add that to any other income they earn. It's an expense to you, income to them.

It is the responsibility of the freelance writers to claim all their income to the IRS.

According to the IRS at Reporting Miscellaneous Income :

If YOU paid $600 or more to any one writer, then you are also resposible for sending them a 1099-MISC (unless they are a corporation) and reporting that income to the IRS on form 1096.

You have to send out a 10-99 to anyone you paid over $600 to throughout the course of the year that isn't a W2 employee (or anyone that resides in a different country(?) or a Corporation).


You don't pay taxes on that money because it is an expense. It gets deducted from your gross revenue and you pay taxes on the remainder.

The outsourcer pays taxes on the amount of money that you paid them.

I'm not exactly sure how it works if you've outsourced to another country.


I'm not an accountant, don't play one on the internet... sounds to me like you need a CPA.

To confirm, you have to get 1099 data (name address and SS number) on any individual you pay $600 or more. This is a an IRS deal, not state. You have to issue the person a 1099 at tax time and send a copy to the IRS.

You are able to claim the payouts as an expense, so you don't pay any taxes--it is up to the vendors to pay their own taxes no matter what the amount. People outside the US pay income taxes according to the rules in the their own country, so you don't need to send them a 1099.

There's lots of helpful information for self-employed/small business people at the IRS site. http://www.irs.gov/businesses/small/index.html. Authoritative source!

Hello Everyone,

Ok, so my question is, I want to start a company (LLC) so I can start selling informational products and to stay compliant with the FTC rules as well as protecting myself personally. So, in the event of selling these items how do you go about collecting taxes/ reporting taxes etc? I want to make sure I do this right so I don't get in trouble for tax evasion.


Also, I have seen several sites that states their company name along with either DBA or a division of the company name can you one explain how this works as well? Any info on this would be greatly appreciated.

Thank you,

re you asking whether they have to pay taxes on their income or whether you have to provide a 1099 form. You don't have to provide a 1099 if you paid them less than $1600 over the year, it may be lower but I think that's right. They have to pay taxes on any income over $600 over the year. But that doesn't concern you one bit, their income tax is their business.

Miles

This will be helpful...

There is a ton of info in this publication and I recommend you read it all since it changes depending on situations and other things.

Also talk to your accountant if you choose to pay people that live outside of the U.S.
Isn't it their job to research this kind of thing?

In the past i have went straight to the IRS (Telephone Assistance for Businesses:
Toll-Free, 1-800-829-4933) Even though it's kind of scary to think about calling the IRS it's their job to tell you the tax laws and advise you what forms to file.

ht tp://www.irs.gov/publications/p515/ar02.html#en_US_publink1000224767

This is an excerpt from the pub.
"Publication 515 - Main Content



Generally, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of 30%. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person's country of residence and the United States. The tax is generally withheld (NRA withholding) from the payment made to the foreign person.
The term “NRA withholding” is used in this publication descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. Generally, NRA withholding describes the withholding regime that requires withholding on a payment of U.S. source income. Payments to foreign persons, including nonresident alien individuals, foreign entities and governments, may be subject to NRA withholding."




There is more about the Form W-8BEN or Form W-8EXP. You can search for it by W-8.

It does say that in most cases any individual, sole-proprietor, company of any sort should be filling out one of these for you.

Either way, sounds like calling an accountant it the best thing to do here.

I am surprised to find out that a lot of outsourcing info do not address the taxation issue.

I looked at the IRS publication W-8BEN and it seems that non-U.S. individuals abroad doing work for U.S. entities are subject to 30% tax which may have to be withheld subject to some excemptions.

If I paid $300 per month for a Virtual Assistant outside the United States, should I have withheld $90 per month (30% of $300) instead of paying the full amount? If I didn't withhold the 30%, who will the IRS pursue the tax from - the Virtual Assistant outside the United States or me being the U.S. entity? (looks like I could be left holding the bag, correct?)