Q: Could paying overseas freelancers via Ria Money Transfer cause legal/tax issues?
I plan to pay my overseas freelancers by sending funds through Ria Money Transfer using my business debit card. The total annual payment will be around $30,000, and I don't have any formal contracts or agreements with the freelancers. I haven't sought any prior advice regarding international payments or tax obligations. Could this approach cause any legal or tax issues?
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A:
Paying your overseas freelancers through Ria Money Transfer won't inherently cause legal or tax issues, but it may raise concerns if not handled properly. First, you need to clearly document all payments, including amounts, dates, and recipients, to ensure transparency if audited or reviewed. Without formal contracts or agreements, you might face difficulties proving the nature and legitimacy of these payments during an IRS audit or review by other authorities.
From a tax standpoint, even though your freelancers are overseas, the IRS typically requires you to report such payments, usually through a Form 1099 or equivalent documentation, depending on each freelancer’s residency and tax treaty status. Failure to properly document or report these payments could trigger scrutiny or penalties. Additionally, using your business debit card for international transfers regularly could flag your transactions for additional monitoring by banks or financial regulators.
To safeguard yourself legally and financially, consider creating simple, clear agreements outlining services provided, payment terms, and freelancer responsibilities. Keeping accurate and thorough records of every transaction is essential. Consulting with a tax professional or accountant familiar with international transactions will also help you navigate these complexities and maintain compliance.
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