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I've seen this asked a few different ways (closest was here), but I am looking to find out from the business's perspective, how to report (if necessary) the amount paid to a foreign contractor.

My situation is as follows: I have a US LLC and am wanting to contract an agency in India that I have found via odesk.com. I know I'd have to file a 1099 for a US contractor working in the US, and I think the 1042(S) for a foreign contractor working in the US, but what if I have a foreign contractor working outside of the US? Would this fall in a box of the 1065? Should I file a 1099/1042(S)?

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  • Hey Jon, in the future, please don't cross-post questions across multiple SE sites. This makes it harder for people with the same problem to find the answers all in one spot. With that said, thanks for following up with a self-answer in both places.
    – jmort253
    Sep 5, 2014 at 5:22
  • no problem! i hadn't thought about it like that before. i'll make sure not to, just wasn't sure where to put this one, especially since both sites were beta. thx again!
    – Jon B
    Sep 5, 2014 at 16:53

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I eventually had to talk to an accountant. He told me that regardless of method of payment, my US LLC does not have to withhold taxes or report the payment as payments to contractors (1099/1042(S)) to the IRS; it is simply a business expense.

He said this gets more complicated if the recipient is working in the US (regardless of nationality), but that is not my case.

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  • I'm not an accountant but that makes sense. It seems the IRS would want the reporting to make sure the recipient pays his or her taxes -- since they are not in the US they don't owe the US IRS anything, so the US IRS would just see it as a business expense for you but not care if the foreigner reports their income or not. And you can run an oDesk report to back up the expense for your IRS purposes (I assume).
    – Emily
    Sep 4, 2014 at 19:47

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