A U.S.-based company wants to pay for online classes/training services that will actually be delivered by a company based in South Asia. The issue is that the U.S. company does not seem comfortable sending the payment directly overseas, and they want proper tax/reporting documentation on their side. They mentioned paying through a 1099 or otherwise reporting the transaction properly.
The full payment is supposed to go to the foreign company because they are the actual service provider. I am not trying to keep any money personally.
My questions are:
If the U.S. company wants documentation for their records, can they pay the foreign company directly using an invoice and W-8BEN-E instead of issuing a 1099?
If they refuse to pay a foreign company directly and want to issue a 1099, should they pay me personally, or would it be better to create a U.S. LLC?
If I personally receive the payment under a 1099-NEC and send the full amount to the foreign company, how would that be reported on taxes? Would it be treated as income to me first and then deducted as a business expense/payment to the foreign service provider?
If I create a U.S. LLC, can the U.S. company pay the LLC, and then the LLC pay the foreign company using invoice/contract documentation?
If the LLC receives $10,000 and sends the full $10,000 to the foreign company, with no profit kept in the U.S., would there usually be income tax owed, or mainly filing/bookkeeping requirements?
If the foreign company owns the U.S. LLC, what forms or filings would be required, especially Form 5472, pro forma 1120, franchise tax, or other compliance issues?
What is the safest structure when the U.S. company wants to report the payment properly but the actual service provider is a foreign company?
I’m not trying to avoid taxes. I’m trying to make sure the U.S. company has proper documentation and that I don’t accidentally create personal tax issues by receiving money that fully belongs to the foreign company. Any CPA, tax attorney, or business owner experience with U.S. companies paying foreign service providers would be appreciated.
/r/legaladvice/comments/1taq4pb/us_company_wants_1099reporting_for_services/
Posted by Akuri22
1 Comment
Why should you be involved in this as a middle man? What’s your relationship to either of the companies in question?
The US Company purchasing the services should receive a W-8BEN-E from the non-US company they’ll be paying. They can keep that in their records as “proof” that the company they were paying doesn’t need to be issued a 1099. They should also keep the invoices and confirmation of payments paid as proof of what was paid.
It makes no sense for you to be involved.