AI Q&A: Overseas but American: What's the Procedure for U.S. Citizens as Foreign Contractors?
GPT-4 Answers: If the foreign contractor is a United States citizen who just happens to be located overseas, what is the correct procedure?
The following text is GPT-4’s reply:
If the foreign contractor is a United States citizen providing services from overseas, you would generally treat them as you would a contractor located within the United States for tax reporting purposes.
This means that if you pay them more than $600 in a year for services rendered, you would issue them a Form 1099-NEC as you would for other U.S. contractors. Despite their location, U.S. citizens are required to report their worldwide income to the IRS, so they should obtain the 1099-NEC for their records and for reporting income on their personal tax return.
It's important to ensure that the individual is indeed a contractor and not an employee. The classification can have significant tax implications. It is also important to remember that a U.S. citizen living abroad may be entitled to foreign earned income exclusions or foreign tax credits on their personal tax return, but that does not impact the requirement for you as a payer to issue a 1099-NEC, assuming the $600 threshold is met.
As always, when dealing with tax matters, especially those involving international circumstances, it is a good idea to consult with a tax professional to ensure all IRS guidelines are being correctly followed.
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