Discussion:Tax on overseas wages

I think that I will not need to withhold medicare, social security, income tax, or unemployment tax for them, since they are not American citizen.

My question is, how can I put their wages as my US company's expense? I do not need to pay tax to US government for their salary, but I can use their salary as expense to deduct tax?? It just sounds too good to be true for me ...

Anyone has a good explanation?

Thanks in advance...

Wei :-)

You will be essentially operating a branch in Taiwan and the earnings in that country will be US source income...best to keep it as an independent contractor if you can :)

What they told me so far is that since these two employees are not eligible for social security or medicare, I "might" not need to withhold the SS and Medicare. About payroll tax, one IRS representative told me that "she think" there is no need to withhold, since they are not in US. But she is not 100% sure, so she requested some specialist to send me an E-mail.

I am now putting these two Taiwanese coworker under my friend's Taiwanese company's payroll, then I pay my friend's company as Outsorced Services.

I will keep my case posted..

Thanks for the answers..appreciated...

Sincerely,

Wei

P.S. I am also trying to find an accountant to help me do the bookkeeping, and tax filing. I would like to find someone who can help me mostly via internet.. could some one give me recommendation? (My company set up November last year, has no income yet, and is requested to file 941, 940, and 1065)...basically, I have no employee now... I have one individual contractor in FL and, as you know, two Taiwanese working for me in Taiwan. If you would like to give me some information, please E-mail me at service@chineseinkonline.com

Thanks...

You've solved the problem yourself, with your "Outsourced Services" situation. You don't need to hire them directly at all, and you get rid of the need to deal with the various income and social security tax laws and tax treaties. I'd go with this.

You might want to be extra careful especially if you are into IT recruitment and placement, outsourcing or offshore development as employee wages constitute a substantial portion of all outgoings. Pay, wages and compensation can be all together different things. I'm assuming you are a resident alien or resident alien with interest in US corp.

Compensation paid to a non resident alien for services performed outside of United States is not considered as wages and is not subject to with-holding. Salaries, wages, bonuses or any other pay for personal servcies paid to non-resident aliens are subject to gradual withholding if the wages are effectively connected with the conduct of your US trade or business.

Also as per IRS compensation paid for labor or personal services performed in US is deemed not to be income from sources within US and is exempt from US income tax if the pay is for labor or services performed as an employee of, or under a contract with i) A nonresident alien individual, foreign partnership, or foreign corporation that is not enganed in trade or business in US or ii)A a resident alien individual, a domestic partnership, or a domestic corporation, if the labor or service is performed for an office or place of business maintained in a foreign country by this individual, partnership or corporation.

Hope this helps. Pl. contact me if you need any further info.

ranchandran_v@hotmail.com