A question about independent contractors and clause on tax forms...

[bjohnson79]

Hello.

I'm actually a Canadian, but my question applies to working with US independent contractors.

As a fresh entrepreneur, I'm creating a video streaming service based in Canada, but the teachers to provide content for the service, many are in the United States and will be paid through commissions monthly through our memberships. In preparing my written agreement with them, when it comes to tax information, are there specific forms that i should include for the independent contractors for their taxes each year, and if so, which forms should they be?

Thank you.

 

[quincy]

Hello.

I'm actually a Canadian, but my question applies to working with US independent contractors.

As a fresh entrepreneur, I'm creating a video streaming service based in Canada, but the teachers to provide content for the service, many are in the United States and will be paid through commissions monthly through our memberships. In preparing my written agreement with them, when it comes to tax information, are there specific forms that i should include for the independent contractors for their taxes each year, and if so, which forms should they be?

Thank you.

You need to sit down with a business law professional in your area of Canada for a personal review of your plans to hire U.S. residents to work for you. This seems a complication that could best be avoided by hiring Canadians.

 

[bjohnson79]

You need to sit down with a business law professional in your area of Canada for a personal review of your plans to hire U.S. residents to work for you. This seems a complication that could best be avoided by hiring Canadians.

Well they'd be independent contractors, not employees, and teachers not just in the US, but around the world would be contributing.

 

[LdiJ]

Hello.

I'm actually a Canadian, but my question applies to working with US independent contractors.

As a fresh entrepreneur, I'm creating a video streaming service based in Canada, but the teachers to provide content for the service, many are in the United States and will be paid through commissions monthly through our memberships. In preparing my written agreement with them, when it comes to tax information, are there specific forms that i should include for the independent contractors for their taxes each year, and if so, which forms should they be?

Thank you.

A Canadian company would not normally provide a tax form to a us representative providing content to the Canadian company. It would be up to the US representative to report their income to the IRS.

 

[quincy]

Well they'd be independent contractors, not employees, and teachers not just in the US, but around the world would be contributing.

You should consult with a legal professional in Canada to discuss the tax implications for you and your company when hiring foreign workers. You have not only Canadian tax laws that need to be considered but also the tax laws in the countries of your independent contractors.

I disagree with LdiJ. There will be withholding forms or waivers that will be needed.

Good luck.

 

[bjohnson79]

Understood. Thank you very much for your help.

 

[bjohnson79]

A Canadian company would not normally provide a tax form to a us representative providing content to the Canadian company. It would be up to the US representative to report their income to the IRS.

Thank you.

 

[LdiJ]

You need to sit down with a business law professional in your area of Canada for a personal review of your plans to hire U.S. residents to work for you. This seems a complication that could best be avoided by hiring Canadians.

This is not an unusual situation nor would these people normally be considered to be employees. It is not at all necessary for the OP to restrict himself to using only Canadians.

However I am sure that a Canadian business attorney could confirm what is the normally way to handle such an arrangement...or could refer the OP to an attorney who could.

 

[quincy]

Canada's Income Tax Act makes income earned by non-resident foreign workers performing services in Canada (whether physically in the country or not) subject to Canadian tax withholding. Or there must be an application for a waiver of tax withholding.

This really needs to be discussed with a business law professional in Canada. There are also some additional quirks depending on the Province.

 

[LdiJ]

Canada's Income Tax Act makes income earned by non-resident foreign workers performing services in Canada (whether physically in the country or not) subject to Canadian tax withholding. Or there must be an application for a waiver of tax withholding.

This really needs to be discussed with a business law professional in Canada. There are also some additional quirks depending on the Province.

Canadian companies pay lots and lots of representatives/agents/vendors in the US and none of them are subject to Canadian income tax. I suppose it is possible for a non resident person performing services for a Canadian company, who is not physically located in Canada when performing the services, to somehow be considered to be physically performing those services in Canada, but I certainly cannot think of an example.

 

[quincy]

Canadian companies pay lots and lots of representatives/agents/vendors in the US and none of them are subject to Canadian income tax. I suppose it is possible for a non resident person performing services for a Canadian company, who is not physically located in Canada when performing the services, to somehow be considered to be physically performing those services in Canada, but I certainly cannot think of an example.

You could read the Tax Act. I can't remember the section. 153?

Please refrain from making broad statements as they are invariably wrong. No representative/vendor/agent in the US is subject to Canadian income tax? Really?

 

[LdiJ]

You could read the Tax Act. I can't remember the section.

Please refrain from making broad statements as they are invariably wrong. No representative/vendor/agent in the US is subject to Canadian income tax? Really?

Give me an example... You are talking about a situation where someone is residing and working in a country for a company located in another country. Most tax treaties would prohibit a country from attempting to tax non residents who had no other connection to the country.

The US collects tax from their citizens or legal residents on their world wide income and that is considered to be more than a bit unusual to the rest of the world. However there is absolutely no provision in US law for the US to collect tax from someone who acted as an agent or representative for a US company while living and working in the country where they are citizens.

I have dealt with Canadian companies for much of my working life and never did such an issue arise.

I can even give the film industry as an example. Someone may make a movie in their home country and that movie might end up someday streaming on streaming services in other countries. I can guarantee that the people who acted in those movies are not responsible to pay income tax in the countries where the movies are shown...even if they are still being paid residuals for their performance.

I can also guarantee that someone who acts in a movie, being made by Paramount Pictures, who is a Canadian actor and the film is being filmed in Canada is not being taxed in the US.

 

[quincy]

Here is a link to the law - but this is also one reason why we do not answer questions about the laws in other countries. Canada is not the US and your experience cannot be widely applied.

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic75-6r2/required-withholding-amounts-paid-non-residents-providing-services-canada.html

You might also want to click on and read "exclusion of film industry" in the link provided.

bjohnson should seek advice in Canada.

 

[Taxing Matters]

Hello.

I'm actually a Canadian, but my question applies to working with US independent contractors.

As a fresh entrepreneur, I'm creating a video streaming service based in Canada, but the teachers to provide content for the service, many are in the United States and will be paid through commissions monthly through our memberships. In preparing my written agreement with them, when it comes to tax information, are there specific forms that i should include for the independent contractors for their taxes each year, and if so, which forms should they be?

Thank you.

If they are truly independent contractors then you'd have no obligation for reporting of payments made or withholding of tax to the U.S. Generally the teachers would also not be taxable in Canada for the personal services that the teachers provide from the U.S. The U.S. - Canada tax treaty provides that that it is generally the country in which the services are actually performed that has the right to tax the income from those services (though the U.S. reserves in its treaties the right to tax its citizens and residents on their income no matter where the income comes from). So in many of the situations with your U.S. independent contractor teachers it is likely that there is nothing you need to do in terms of reporting or withholding. But as I don't practice in Canada and am not an expert in the details of Canadian tax law, I recommend you see a Canadian tax professional to ensure you have all your Canadian tax obligations covered.

You may want to consult a U.S. tax attorney too to make sure that the teachers in the U.S. are really independent contractors. If they are really employees then you'd have U.S. employment tax obligations.

 

[quincy]

Please read Canada's Regulation 105.

Again, bjohnson needs to speak with a professional in his area of Canada.