Hello, I have rescently decided to have a friend of mine start to help me with some programming. I run a small business, send out bills, get money, and keep track of it, then, at the end of the year, I tell my accountant about it, and she tells me I profited x amount of dollars and I send a percentage to the IRS. Pretty general practice of any small business. So now, I am not quite hired a full time employee, but rather I am contracting a freelance programmer to assist me. In the past, I just send him money via Western Union, and call it a draw on my part, and pay the income tax on it myself, it has never been all that much. Now, we are going to do more and more work together, and I need to know how to do this so my IRS and his “IRS” are all happy. The country is the Netherlands, and I would like to know how to properly deal with this, thanks.
IANATax Accountant or Lawyer, but the first thing you need to find is how the Netherlands requires tax reporting (assuming he’s not a U.S. Citizen). This page seems to have a number of links that may help.
If he is a U.S. citizen living and working there, then he should be fairly well versed in what the IRS requires, but my assumption is that you call him an independent contractor and provide a 1099 each year. Then he is responsible for filing his taxes.
Just some common sense: either he is your employee or he is not. There is no middle ground and it sounds like he is not your employee, rather he is an independent contractor in which case you are not responsible in any way for his taxes. He bills you and you pay him like any other business. For you it is one more bill you’ve paid.