How to File Taxes for International Contractors Who Get Paid in Cryptocurrency

The Internal Revenue Service (IRS) categorizes taxpayers using strict criteria to define a US Person. A US Person includes any US citizen, a resident alien, a domestic partnership, a domestic corporation, or any estate or trust other than a foreign estate or trust. Resident aliens are typically determined by holding a Green Card or satisfying the Substantial Presence Test. These yearly reviews ensure you’re building a solid foundation for everyday compliance. Missing this deadline results in automatic penalties unless you’ve applied for an extension.

• This approach requires different hiring processes, possibly through an employer of record (EOR).
• In one high-profile case, FedEx paid $228 million to settle a lawsuit after misclassifying its drivers as independent contractors instead of employees.
• These forms are completed by the payer and sent to the IRS to report income paid to individuals or businesses that are not typically their employers.
• When onboarding independent contractors, it is imperative to collect the necessary tax forms to ensure compliance with IRS regulations.
• The form is typically collected by the employer and may be submitted to a Foreign Financial Institution (FFI) upon request.
• Even with compliance lanes cleared, ongoing operational hurdles can cause delays, unexpected costs, and strained relationships.

UK-specific tax documentation

Follow these practices to maintain compliance when hiring foreign contractors. @Anastasia Smirnova Yes, definitely ask about local tax obligations upfront! Germany has similar VAT rules to the UK – German freelancers might need to charge VAT called (Umsatzsteuer “depending”) on their revenue thresholds. I always include a clause in my contractor agreements now requiring them to notify me of any tax changes that could affect billing.

The Employer’s Guide to Handling Tax Forms for US vs. International Contractors

I’m highly doubtful they have some special access that regular taxpayers don’t. We’ll answer your questions, walk you through how our platform works, and help you start employing contra asset account talent compliantly anywhere. Consumer remittance tools like Western Union or MoneyGram are built for personal transfers. They can breach business reporting rules, carry higher FX spreads, and lack proper audit trails. If any one of these fails, you’re looking at an employee, not a contractor, under state law.

• Most digital payment platforms like PayPal, Wise, or Deel allow you to send payments in the currency of your choice.
• Having a solid written agreement is crucial when you hire a foreign contractor.
• This will ensure your financial transparency and legal protection, helping you avoid audits, disputes, and potential penalties.
• Since every country has its own set of rules, thorough research is essential.
• You don’t have to secure a visa or a work permit for remote workers who don’t have US citizenship or a residence permit.
• This article also includes an FAQ and best practices about working with contractors in Mexico.

Ignoring Local Tax Laws for International Payments

A 1099 must be issued to contractors and sent to the IRS by 31 January each year. I’m Amy Northard, and I’m the founder of The Accountants for Creatives®. My team and I understand that the last thing you want to think about is taxes and bookkeeping. That’s why we handle the financial side of things for creatives across the US, giving you the freedom to get back to the work you love. A global giant, Payroll Taxes PayPal supports transactions in multiple currencies across over 160 countries. Its user-friendly interface makes it a favorite among small businesses and freelancers.

• Your agreement should also take local labor and tax laws into consideration, so it is not invalidated by mistake in the future.
• Though you have the ability to direct the result of the work, the Internal Revenue Service (IRS) guidelines state that hiring companies can’t control the contractor’s work or how they do it.
• Although hiring international contractors might seem like an efficient way to test the waters in a new country, it’s important to understand and follow the rules regarding contractors.
• You may have to file Form 1099-NEC if you hire a contractor from the States.
• All experts agree on the importance of regularly reviewing tax forms to ensure ongoing compliance.
• Common methods include bank transfers, wire transfers, and electronic payment platforms.

• Catapult Distribution modernizes artist payouts and tax workflows with Trolley, delivering faster, smoother experiences for creators worldwide.
• Understanding tax treaties can help reduce withholding tax rates for certain contractors, depending on their country of residence.
• For example, a UK company paid a contractor in Ethereum and was required to report the fair market value at the time of payment in GBP.
• We’ve simplified the filing process and added more flexible options for importing your data.
• U.S.-based companies paying international contractors should have contractors fill out an IRS Form W-8BEN, which certifies their foreign status in the eyes of the U.S. government.

The global paying international contractors marketplace offers incredible talent, untapped markets to explore, and… Payoneer has a global presence like PayPal and offers multiple options for money withdrawal, including their own Mastercard. Video Husky helps companies turn their video creation process into an efficient production line for one flat fee.

Any specific questions you may have can be sent to /contact and we would be happy to assist you. Let our team help navigate the many tax compliance considerations involved with doing business overseas. Be sure to understand the difference between employing someone overseas and working with them as an independent contractor. Paying overseas vendors is common, but the hidden costs of B2B cross-border payments aren’t. We’re delighted to express our satisfaction regarding our collaboration with RemotePass.