USA record keeping requirements when hiring overseas freelancers

Question

Does anyone know what the payment receipt requirements are for a USA client hiring freelancers from other countries? I know I don't need to do a 1099 for them as a foreign freelancer would not need pay US Income taxes. But are there any records I need so I can deduct the payment from my income, beyond a PayPal or credit card receipt that shows I paid them?

I have hired people through sites like eLance and oDesk knowing those sites handle the record keeping for me, but I have someone I'd like to hire directly and I want to make sure the IRS can't come back and deny my deduction of the money I pay him.

Thanks - and I hope this question is appropriate for this forum.

Answer 1

I have not done this, but it seems to me that a record of your payment (through a CC transaction or bank record) should be sufficient.

It will depend on how you are filing - if this is a corporate tax return or a schedule C for your company, you would not put the amount under wages paid to others, you would put the payment in the line item associated with that kind of expenditure, as if you were purchasing a product from another company. This person is a vendor (or consultant) and you are paying their business entity.

Answer 2

From what I've been doing there are no real requirements/laws. You should just document all the payments you make for tax purposes and keep copies of any agreements you have with them. They are independent contractors.