I am looking for some guidance on the treatment of payment for services to a non-US consultant.
I paid a foreign (China-based) consultant to do software development for my LLC this year. This person is a "non-resident alien" who has not visited the US for this work. All work was done in China.
According to Publication 515: "Services performed outside the United States. Compensation paid to a nonresident alien (other than a resident of Puerto Rico, discussed later) for services performed outside the United States is not considered wages and is not subject to withholding."
How should I report this cost on my Form 1065? Based on the above explanation, I assume it should not be "Salaries and wages". Perhaps "cost of goods sold" (Cost of Labor) or "other"?
Because the individual does not need to file a US tax return, I will not apply for an ITIN, nor will I issue a 1099. Is this correct?
Since the income is not subject to withholding, I will also not file a
1042-S for the foreign consultant.Curtis Eubanks