US Tax law and non-resident contractors
Thread poster: Scott Evans
I used to work for a translation firm that used to not file tax forms for the translations performed. I would rather do things legally now that I am on my own...any ideas what tax forms need to be filled out? Any advice? I have some of the forms, some of the tax treaty information, but it is sill not making sense.
Although you are a non-resident, you need to fill in two forms, W-7 and W-8BEN so that the IRS can provide you with an ITIN (individual Taxpayer Identification Number), but if you are non-resident you are exempt. However, once you\'ve filled in the forms, it\'s up to the company that\'s hiring you to do the rest of the paperwork.
I\'ve been working for the US and then they send me (still) another form which clearly states an 03 exemption code. This is as much as I can tell you. It seems to be something relatively new (about 3 years).
| US Tax law for residents... || Jan 3, 2003 |
My situation is the opposite: I\'ve been doing projects for a French firm on a freelance basis. Obviously they don\'t pay taxes on my work (or at least not VAT), but I have to figure out how to pay income tax on what I\'m making. Any suggestions? Anyone have ideas on what forms I use? (I could be wrong, but the US tax form for foreign income earned by US citizens seems to be for citizens residing abroad...)
| | jccantrell
Local time: 06:57
German to English
| Taxes and the US. || Jan 6, 2003 |
Primarily for Mary, but for anybody in a similar boat, the IRS has plenty of information available at this link:
For Mary, as you indicate that you are here in the USA, you will need to file Schedule C, profit or loss from a business. I do this every year. On this form, you get to deduct your business expenses, you put in your income from the business (converted into US dollars, of course) and figure out your tax based on the results.
You will also need a form 1040 and you may need myriad other forms. If you are just starting out, you might want to avail yourself of a tax professional (which, thank God, I am NOT!).
Once you have a filled out form, you should be able to use it again for next year, changing the numbers as appropriate, of course.
May all your numbers be black!
| The rule of physical presence || Jan 15, 2003 |
I was so shocked I almost dropped dead on the spot, but when I sent a help request e-mail from the IRS site, I actually got a prompt and complete answer, so here is the basic principle: For U.S. tax purposes the source of the income is where you are physically when you perform the work. It doesn\'t matter where you are a resident, where the customer is or how or where you receive payment:
There is no problem with you earning income as an independent
contractor, however, depending on where you perform the service will
determine what taxes you would be liable for. The income would have to
be reported as self-employment income.
If you perform the services outside the United States, you may be
eligible to exclude the income from U.S. tax but you would still be
required to pay the self-employment tax on the income. If the service
were performed in the United States, then you would have to report and
pay the tax on the income (if applicable) and also pay the
self-employment tax. If you perform some of the work outside the United
States and part of the work in the United States, you would have to
allocate the amount of income to the work performed in the United States
and the work performed outside the United States. Please refer to
Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad,
for information regarding this issue.
An important point for you to consider is whether or not your
eligibility for the foreign earned income exclusion is going to be
affected. If you have to return to the U.S. to perform a portion of the
work, and you are claiming physical presence to claim the foreign earned
income exclusion, then your claim may be affected. Please refer to
Publication 54 for detailed information regarding the requirements for
claiming the foreign earned income exclusion.
Don\'t be afraid to just go right to the help request on the IRS site and ask a specific question. It is much better than trying to deal with them by phone!
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US Tax law and non-resident contractors
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