what are the rules regarding hiring foreign contract workers who work at home?

October 22, 2009 12:08 PM

What are the legal/tax issues involved in an US-based company hiring European individuals to do contract work at home (things like translating documents; the person hired would never need to leave their home country). From the standpoint of the US-based business, it is simply a matter of sending a 1099 like any other contract work? Is there anything else to consider?
posted by helios to Work & Money (11 answers total)

Response by poster: Note: I realize the best answer to this question is to call a lawyer. However, I'm interested in some general information on the topic, and I have been unsuccessful in getting any information from Google because all the results have to do with immigration/visas, which is obviously not an issue in the above case.
posted by helios at 12:11 PM on October 22, 2009

This could fill a book. General advice here is unhelpful because of the complexity of international tax law and the fact-specific nature of your question. You would not be helping yourself taking advice from non-licensed strangers on the internet. Please obtain a lawyer immediately.

*This is not legal advice. I am not your lawyer.
posted by Ironmouth at 12:18 PM on October 22, 2009

IANAL but AFAIK you are only obligated to supply a 1099 to a citizen or resident alien who is liable for US income taxes. You do not have to deduct SS, Medicare, or pay Unemployment Insurance for independent contractors, even if they are citizens. I would think that only a bill or receipt should be necessary to claim the fee as a deductible business expense.
posted by clarknova at 12:23 PM on October 22, 2009 [1 favorite]

You can't 1099 a foreign worker living abroad as they can't be taxed by the IRS. Dealing with an American living abroad can be a bigger PITA.

http://www.webmasterworld.com/webmaster_business_issues/3549474.htm

You will presumably have invoices, check stubs and whatever to prove your expense incurred in hiring the foreign individuals. You should just list those expenses as any other business expense.

This says nothing about any jackassy tax laws they might have in the foreign country, but I would not worry so much about that unless you end up being the primary source of income for any of these individuals.

That said, IANAL, IANAA, etc.
posted by rocketpup at 12:23 PM on October 22, 2009

What Ironmouth said.

That said, poke around the IRS website before talking with the lawyer so you have some background. Here are a couple of pages that might give you a start. This is not legal advice and I am not your lawyer.
posted by lorrer at 12:24 PM on October 22, 2009

...but I would not worry so much about that unless you end up being the primary source of income for any of these individuals...

And if they don't ask you for the tax documentation they need for their own accounting, that's their affair. Many Europeans prefer to not make a fuss, especially the further south they are.
posted by clarknova at 12:30 PM on October 22, 2009

Obviously contact a lawyer, I am not one blah blah blah, but I work for a large corporation and we do this all the time. We send our usual vendor kit out, substituting a W9 with a W8-BEN.
posted by hamsterdam at 1:08 PM on October 22, 2009

I'm a Canadian resident who contracts for a US company. I don't get 1099s (since I have no dealings with the US IRS) but did have to fill out a W8-BEN. In Canada I'm just a sole proprietor and pay my taxes like any other self-employed individual here; not sure if it would work the same for a UK resident.
posted by Emanuel at 10:16 PM on October 22, 2009

Best answer: I was a freelance translator a few years ago (am American and have lived in France for 10 years now). Generally, translators don't work under contract, we invoice for services rendered. Potential clients contact us, we give an estimate if requested, and if accepted, we do the work and invoice it. First-time clients with bigger jobs (requiring more than a day's work) will usually need to pay part of the invoice before delivery. If we already know the client and they've asked us to do a job right away (pretty common!), we'll do it, and group together "jobs" onto a single invoice, sent once a month. One of the reasons for this is that it's rare to get translation work that takes more than five days. The average in my experience was two to three days. (We charge per word, by the way, I speak of "days" only since I know most other people think in those terms.)

In my current job I've managed some large translation projects for which I took on the services of a dozen freelancers in the US. My management, used to contracts, wanted to write up contracts for them... I told them the translators would probably refuse since they prefer the freedom and ease that "invoicing for services rendered" offers; my management insisted. All twelve translators refused contracts, as I expected. They invoiced us as usual, and delivered all their work on time, which was a novel experience for my management. (I work for an IT and business services company.)

So I don't think you'll need to worry about international contract law with translators, it's just not how we operate. Freelancers are sole proprietors in Europe and know how things work internationally since our job pretty much requires it; feel free to ask a potential translator for information. (If they can't provide it... find another translator. A translator who doesn't know or can't find out how to work for someone in the US, is very likely not a serious or good translator.)
posted by fraula at 12:33 AM on October 23, 2009

(I should probably add that none of the freelancers I took on worked full-time. If you want a dedicated, full-time person, then yes, you'd need to write up a contract. However, it's common to take on several translators, like I did, and split up work amongst them. With a regular client, we are very, very accustomed to getting a job request email from them, confirming the job and starting it five minutes later, then delivering when we've said we would. Beyond linguistic skills and experience, rapid response time and reliable delivery are key to surviving in this industry.)
posted by fraula at 12:45 AM on October 23, 2009

Best answer: I'm a freelance translator who has done odds and ends of work for clients in the US (I'm in the UK). I just looked at my records and one or two of them have asked me to fill in, scan and send a W8 form (which states that I'm not a US citizen and am not liable to US tax). I am responsible for my own taxes, and none of my clients need worry about deducting tax at source.

Fraula covered this, but I'll add my piece - as a freelancer I don't consider myself "hired" by a client - I am contracted to do a particular piece of work, and I invoice for that job. The result of this is that I work for a great many clients and am occasionally unavailable to do repeat work for a particular client - I try to make myself available for *good* clients, though (those that are nice to work with and who pay on time).
posted by altolinguistic at 1:57 AM on October 23, 2009