Foreign worker

[erchess]

A client has a guy who would be a normal garden variety employee except he lives in and is a citizen of Bulgaria. He creates websites for clients of my client and depending on the wishes of said client my client or someone else like Go Daddy hosts the site. I don't actually know how the computer code that makes the website is moved around. Do I need to know in order to do my client's taxes? This only began in 2012 so I am a year from needing answers except my client has an enquiring mind and wants to know. I know the answer is too long to post here so just point me in the right direction to answering - how are wages of a foreign employee reported to him if at all and how are they reported on the employer's Sch C? Even search terms for google or the IRS Site (specify which) would likely be enough to get me started.

This guy is my best client in that he expects to pay me for every minute I spend with him on my mind. All he asks is a weekly invoice and he pays me so fast my head spins. So ya there isn't much in my life ahead of keeping him happy.

[Koss]

Employee?

Why is the guy in Bulgaria classified as an employee?

Sounds to me like he's probably an independent contractor.

Either way, the amount paid to the guy in Bulgaria is an expense on Schedule C. It would either be wages or contract labor.

If the guy is really an employee, there's going to be a lot of baggage involved with the withholding, and other issues. The employee will need to get an ITIN.

If he's an independent contractor, there may not be any issues at all. We can argue until the cows come home about whether your client needs to issue a 1099-MISC, and how he would do so to a foreign payee that doesn't have an EIN...

I'm not sure it matters "how the code is moved around," i.e., where the server is located, etc. I don't think that guy in Bulgaria has a real nexus to the United States.

I'm sure we'll get some other opinions, and I haven't thought through all the variables. But I'm really not sure your client has any obligation other than writing a check, and reporting the expense on Schedule C as contract labor. Or advertising. Or IT services. Or something else.

BMK

[Koss]

Foreign Contractors

Suppose I have a going concern here in the USA, and I am considering expanding the operation. I'm thinking about opening a new office in France.

So I retain the services of an accountant and an attorney in France.

Does anyone really think I have to issue a 1099-MISC to these guys?

If I tell them they need to get an EIN, they would probably laugh. The US Treasury Department simply has no jurisdiction over them.

I'm not sure it's all that different if you're paying a guy in Bulgaria for IT services.

BMK

[erchess]

TY Burton

I see your point. Anyone else want to disagree? What bothers me is that this guy would be an employee if he were here in the US because he is supervised and controlled like an employee. No other employee does the kind of work he does but other people perform advertising related services to the advertising firm and they are all US based employees and like him they have employment contracts.