1099 wierdness, international and expense edition
February 11, 2017 2:44 PM Subscribe
I am being paid by employees of a global firm in a way that makes it unlikely I will receive 1099s from the firm or the employees. I would prefer this not be the case.
I have never in my life received the federally-mandated 1099s that are required for independent contractors when I have worked for a certain subset of folks, small-timers and so forth. I don't care, but the ritual of pointlessly requesting them each year is tiresome.
This year, a new wrinkle! I have a great, multi-billion-dollar global client that is primarily a Chinese company but which does business in the US via a domestic subsidiary. I invoice the domestic firm.
My first invoice was paid via international EFT in chunks originating in China. No big deal, I just figured maybe the US accounting was over there or something. My second invoice was paid via EFT directly by my contact for the specific task I had performed, on an invoice to the US firm.
I am still working directly with my second contact and everything is going great. But she just mentioned to me that the reason she was paying me directly is that her employer has directed her to pay me as an expense for reimbursement.
This certainly guarantees that the US accounting department won't even know that I am supposed to get a 1099. I'm not even sure if they would be liable; I think possibly their employee may become liable, something she is unlikely to be aware of or understand.
QUESTION ONE
If the Chinese parent company paid my first invoice directly on behalf of the US firm, who owes me a 1099? If the parent company is discrete from the US firm and out of US jurisdiction, no-one, correct?
QUESTION TWO
Who owes me 1099s in the domestic expense-payment scenario, my contact or her employer?
Thanks!
I have never in my life received the federally-mandated 1099s that are required for independent contractors when I have worked for a certain subset of folks, small-timers and so forth. I don't care, but the ritual of pointlessly requesting them each year is tiresome.
This year, a new wrinkle! I have a great, multi-billion-dollar global client that is primarily a Chinese company but which does business in the US via a domestic subsidiary. I invoice the domestic firm.
My first invoice was paid via international EFT in chunks originating in China. No big deal, I just figured maybe the US accounting was over there or something. My second invoice was paid via EFT directly by my contact for the specific task I had performed, on an invoice to the US firm.
I am still working directly with my second contact and everything is going great. But she just mentioned to me that the reason she was paying me directly is that her employer has directed her to pay me as an expense for reimbursement.
This certainly guarantees that the US accounting department won't even know that I am supposed to get a 1099. I'm not even sure if they would be liable; I think possibly their employee may become liable, something she is unlikely to be aware of or understand.
QUESTION ONE
If the Chinese parent company paid my first invoice directly on behalf of the US firm, who owes me a 1099? If the parent company is discrete from the US firm and out of US jurisdiction, no-one, correct?
QUESTION TWO
Who owes me 1099s in the domestic expense-payment scenario, my contact or her employer?
Thanks!
Anyone who paid you $600 in 2016 owes you a 1099. If they split that among multiple parties so that each paid you $600, that's their problem, not yours. They each owe you one.
Just report all the income. And tell your contacts at Chinese Multinational Concern "I am reporting all this income; you might want to make sure you are reporting it correctly too." But it's not your problem if they don't.
I've had income from foreign sources before, and it's never been a problem for me to report it. What can be problematic is claiming a credit for foreign withholding taxes paid on that income (there is a form for that, but apparently it raises eyebrows).
posted by adamrice at 3:19 PM on February 11, 2017 [1 favorite]
Just report all the income. And tell your contacts at Chinese Multinational Concern "I am reporting all this income; you might want to make sure you are reporting it correctly too." But it's not your problem if they don't.
I've had income from foreign sources before, and it's never been a problem for me to report it. What can be problematic is claiming a credit for foreign withholding taxes paid on that income (there is a form for that, but apparently it raises eyebrows).
posted by adamrice at 3:19 PM on February 11, 2017 [1 favorite]
Response by poster: Oh I report everything, based on my deposits to the LLC account. But the attributed payee in my records is the invoiced party, the US subsidiary.
posted by mwhybark at 3:52 PM on February 11, 2017
posted by mwhybark at 3:52 PM on February 11, 2017
Response by poster: Ha, I just realized they are setting themselves up for a new one too. They wanted to go to paying via Paypal, which, that's cool. But I think Paypal has to file aggregate 1099-Ks now too. I wonder if the payment-delivery systems they used for the various payments have 1009s waiting on me. That would probably work for 2016 but if I can imagine getting overlapping 1099s in the future.
posted by mwhybark at 4:02 PM on February 11, 2017
posted by mwhybark at 4:02 PM on February 11, 2017
Reimbursable expenses aren't part of a 1099 and aren't taxable. That may be how they're trying to skirt this issue. If you don't get 1099s, report charges for your labor only, don't include payments for reimbursable expenses.
posted by quince at 4:49 PM on February 11, 2017
posted by quince at 4:49 PM on February 11, 2017
Response by poster: The invoIces I have received payment for are 100% pure American labor, billed hourly, with activity breakdowns on the invoice. I don't ever anticipate incurring any other sort of expense for this client.
I don't think they are trying to dodge 1099s, I think they are trying to dodge interminable pan-pacific Chinese business meetings, which can have a way of leading to pure inaction. By having a given employee pay a contractor and expense it, the money flows without a giant series of meetings.
posted by mwhybark at 5:08 PM on February 11, 2017 [1 favorite]
I don't think they are trying to dodge 1099s, I think they are trying to dodge interminable pan-pacific Chinese business meetings, which can have a way of leading to pure inaction. By having a given employee pay a contractor and expense it, the money flows without a giant series of meetings.
posted by mwhybark at 5:08 PM on February 11, 2017 [1 favorite]
I've experienced this many times, over many years, and have consulted the IRS about it more than once. Still, I'm not a tax expert or lawyer.
But as I understand it, your responsibility is to report the income. Period. That's what I do, and I've never once had a problem. Whether the payer has, I don't know, or care. Although I agree w/ above that it's a nice courtesy to inform the payer of your reporting.
posted by LonnieK at 6:47 PM on February 11, 2017
But as I understand it, your responsibility is to report the income. Period. That's what I do, and I've never once had a problem. Whether the payer has, I don't know, or care. Although I agree w/ above that it's a nice courtesy to inform the payer of your reporting.
posted by LonnieK at 6:47 PM on February 11, 2017
As far as I can tell, you are only required to make a report to the IRS if you don't receive a W-9 or a 1099-R. I am not a tax expert but my understanding is that you don't have any obligation to spend your time and energy worrying about it if they fail to issue a 1099-misc.
If you don't get a more authoritative answer here, I might call the IRS and just ask what your obligation might be if a company fails to issue you a 1099-misc. If I'm right, you can save your energy from trying to change a giant Chinese bureaucracy and just focus on doing your job (and paying your own taxes).
posted by metahawk at 8:13 PM on February 11, 2017
If you don't get a more authoritative answer here, I might call the IRS and just ask what your obligation might be if a company fails to issue you a 1099-misc. If I'm right, you can save your energy from trying to change a giant Chinese bureaucracy and just focus on doing your job (and paying your own taxes).
posted by metahawk at 8:13 PM on February 11, 2017
Why do you care if you get a 1099 or not? You presumably keep records of all your income, so you already have the information you would get from the 1099.
1099's are issued for the benefit of the IRS, not for the benefit of the recipients. The IRS just wants those 1099's so they'll know if you're under-reporting your income.
posted by Sxyzzx at 10:06 PM on February 11, 2017
1099's are issued for the benefit of the IRS, not for the benefit of the recipients. The IRS just wants those 1099's so they'll know if you're under-reporting your income.
posted by Sxyzzx at 10:06 PM on February 11, 2017
Response by poster: I care because of the grotesque theatrical sighs regarding this issue I have experienced when hiring accountants to do my taxes in the past, and because I am concerned for my clients when my clients do not follow the law.
posted by mwhybark at 10:32 AM on February 12, 2017 [1 favorite]
posted by mwhybark at 10:32 AM on February 12, 2017 [1 favorite]
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This guide may help you with respect to your second question. It makes mention of a procedure for middlemen recipients on page 2.
posted by bkpiano at 3:03 PM on February 11, 2017