A US company has hired a foreign (non-citizen/non-resident) worker (probably independent contractor) to do work, but not in the US.
Is any withholding required? Unless the worker ever comes to work in the US, my understanding is that there is no tax that the worker owes to the US government, and no withholding required by the payor.
Do I have that wrong?
Thanks.
That sounds right, although the details can be extremely complicated. See Pub 519, and the instructions for forms 1042 and 1042-S.
It is also possible that although you are not responsible for foreign taxes, the worker may get into trouble with the country where he lives unless you withhold their tax. The worker presumably has an incentive to let you know if that's the case.
You have it right, but I believe the US company is required to obtain Form W-8BEN from the worker. This establishes that worker is an exempt individual and the US company is not obligated to withhold the mandatory
30%.
Thanks Alan. That makes sense.
Have something to add? Share your thoughts — no account required.
Ask the community — no account required