Withholding Taxes on Payments to Foreign Individuals

From OMA Connections Partner GBQ: “As many middle market businesses are forced to adapt to the increasing globalization of the marketplace, they are not always properly equipped to deal with the variety of regulatory and compliance-related issues they will face as their business crosses borders. One prevalent issue is the withholding tax requirement imposed by the U.S. on payments to foreign persons. Two common payment types are payments to foreign individuals for personal services, which include:

Payments to foreign individuals as independent contractors

Wages paid to nonresident aliens as employees

“The company making these payments is considered the “withholding agent” and is required to withhold taxes on these amounts and remit the tax to the IRS, similar to the way that taxes are withheld on a U.S. employee’s W-2 wages.”