[RyanUS]

Hi, I am wondering how an employer has to file with the IRS when paying to a foreign vendor (person/company, not incorporated) from Germany.
I learned there is a tax treaty between Germany and the US, so the foreign vendor out of Germany has to pay taxes in Germany. His services are under article 14 of the treaty, independent personal services in the field of media and teaching. But with which form does the employer report his services to the IRS? And does the vendor need to report to the IRS, too, although paying tax in Germany? Thank you for your help!

[AtlantaTaxExpert]

Ryan:

The employer is NOT a true employer; he is a CLIENT and the foreign vendor is an independent contractor who, BTW, has NO U.S. tax liability if the work is being performed in Germany.

As long as the vendor does not spend a substantial amount of time in the United States, there will be NO U.S. tax liability, and you will have no requirement to report ANYTHING to the IRS.

[RyanUS]

Thank you! The vendor is in the US on a J1 Visa, and the work as an independent contractor (outside the J1) is performed in the US. Does that change the situation? What would be considered 'a substantial amount of time in the US'? Thanks again!

[AtlantaTaxExpert]

The fact that the vendor is located IN the U.S. DOES change how you report the payments. Since he is an independent contractor, you will have to report the payments to the IRS using Form 1099-MISC.

CAUTION: Having him perform contract work outside of the J-1 visa MAY be a violation of the visa on BOTH your part (for offering the contract work) and on HIS part (for accepting the work). You should contact an immigration attorney for guidance on this aspect of the situation.

However, even if the contract is a visa violation, you STILL have to report the income to the IRS via Form 1099-MISC.