So many people enjoyed seeing the types of questions their AP peers were asking earlier this spring we thought we would follow up with the following sample of questions asked over the past few weeks, answered for our current subscribers, and that have recently been added to our Tax FAQ Database.

Question #1

An individual has sent me a signed W9 with a SSN of 9XX-7X-XXXX, so it seems to fit the ITIN criteria. But I put the information through the IRS TIN matching site and it came up as good (result 0). Would ITIN's come up as valid on the IRS matching site as they are not really SSN's?

Question #2

I reviewed Publication 515 and am very confused. My situation - My US Corporation is paying a foreign vendor for software development and support they are performing in their own country. None of their work is done in the US. We do not have an income treaty with this country. I keep finding documentation that says that if the personal services were not performed in the US, there is no reporting requirement. Am I reading this correctly? Also, if the above is true, do I need to collect any form of company documentation (other than check it against the OFAC list). All the W8 forms seem to be for identifying US source income.

Question #3

My superiors have decided to consider work done by a foreign vendor as services and not royalties. But in my research, I have uncovered some other facts and figure that may be pertinent to this issue. Situation: Our Company plans to bring a foreign contractor to the US to help with a software installation. I have also discovered that the foreign company has a US based location that is a corporation. 1) I want to ask the company to bill us for the work in the US through their US Corporation. If this is set up as a US corporation, all I need is a W9 and can report as normal. Can a foreign company have a US Corporation? If not, I would have them submit a W8-ECI, make sure there is a valid US TIN, and then would not need to backup withhold. Is this correct? 2a) Assuming the above didn't work out and I needed to collect the 30% withholding because we are paying the foreign company directly. Would the withholding also include any expenses the contractor is getting reimbursed, such as airfare, hotel, etc? 2b) Assuming the above does work, am I creating future issues with the IRS by paying the foreign company for the services done in that country (non reportable) and the US affiliate for the services provided in ours (reportable)?

Question #4

Setup: Client - My Company - Our Agents - vendor Situation: We work for clients that have us deal with their defaulted properties. My company has agents (not employees) that then deal with the properties. The agents are compensated by getting the listing for the defaulted property and get their normal real estate seller's commission when they successfully sell the property. The vendors in this case are the people who are defaulting, who are given financial incentives to voluntarily vacate the property in an organized, efficient and "non-damaging" manner. The payments to the vendors are set by the client, given in the form of a table. The agents make all "oversight" determinations and deal with the vendors (when did they leave, was it "non-damaging", etc). My company makes payments on request from the agents and verifies that the terms of the client rubric are followed. Question: When the agent has us pay the vendor directly, my company has been sending the 1099MISC to the vendor. My question is who has reporting responsibility when the agent pays the vendor and requests "reimbursement" from my company? I feel the agent has the oversight function in this case and significant economic interest (they can’t sell the home if someone is still living there and won't leave). But my company gets a set fee from the client for the successful sale of the home, so we have an economic interest as well. One other question: In the case above, since we are reimbursing the agent, my company does not have to report the payment to the agent. Correct?

Question #5

My company is settling a title claim matter by paying a judgment against our insured (basically purchasing it). The payment is being made to an individual. I have the information as to what is the original amount and what is the interest. Is the interest reportable? If it is reportable, is it reportable on the 1099MISC under box 3 as a settlement or should it be reported on a 1099INT? If the payee was an investment firm that purchases these judgments and collects on them (the interest is income to them), does this change the situation (do I report on 1099MISC in box7 instead)?

We hope you have found this sample interesting. Please note also that we don't merely answer such questions for the organization that asks them. Instead, we scrub the question for private information and add it to our sortable Tax FAQ database of hundreds such questions and answers. This way all of our subscribers can learn from their peers experiences. What's more, if you subscribe today for one full year you can save 50% off the price of our $150 monthly subscription! This means you can get an entire year's worth of making your life easier by letting our veteran tax attorneys answer your federal, state, and local tax compliance questions - and do so within two business days or less!