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Dear Sirs:
We publish a monthly magazine and pay individual contributors of art and photos as contractors to whom we issue a form 1099 at the end of the ear.
We recently paid a photographer $1,000 for photos. This person resides in Montreal and is a Canadian citizen. She has provided us with her S-I-N number; however, I have no idea if we need to issue a form 1099 or something else at year end.
Would you please advise me as to what forms we need to file? Thank you so much for your time.
Regards,
SSSSSSSSSSSSS
Accounting Manager
Florida
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david ingram replies:
To make yourself happy, you should likely issue a 1042-S form although I do
not feel that you have to. One of our clients does the same thing an
receives a 1099 or a 1042-S form from about half of the companies that he
deals with in the US.
There is no rhyme nor reason behind what he gets because he sells the same
product to many different publications and is clearly self-employed.
"IF" your Canadian Resident had performed the services in the US,than a
1042-S would definitely be in order but withholdiong is still a dubious
thing because if the recipient is self-employed and earns less than $15,000
as an entertainer or artist, there is no tax to the USA and they can claim
the Benefits of the US/Canada Income tax treaty to avoid the withholding
tax.
When the services are performed "outside" the US, there is NEVER US
withholding because the recipient person is not subject to US tax unless a
US citizen. "IF" you were paying a US citizen living in Canada, than you
would issue a 1099 as usual because the 1042-S is "ONLY" for "foreign"
persons and the US citizen living in Canada (or France, or Germany, or
Indonesia or Saudi Arabia) "IS" still subject to US tax and has to file a US
return every year whether they have US income or not..
You can find the instructions for form 1042-S at
http://www.irs.gov/pub/irs-pdf/i1042s02.pdf
See page 4 for a description of what amounts have to be reported and what
amounts do NOT have to be reported.
The actual fill-in form can be found at:
http://www.irs.gov/pub/irs-fill/f1042s03.pdf
If you are still not sure, just fill in the 1042-S and do not make
withholdings. Your recipient is NOT subject to tax in the circumstance you
described.
If you need more help, please contact us at:
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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Be ALERT, the world needs more "lerts"
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