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David Vang

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Ask the consultant: Hiring outside the U.S.

  • October 27, 2013 - 2:11 PM

Question

As a small-business owner contemplating hiring full-time and part-time staff outside of the United States, what sorts of potential tax issues might I not have thoroughly thought about?

Is there anything that may come back to bite me in the future?

Felicia Gopaul, College Funding Resource, www.CollegeFunding Resource.com

 

Answer

If you are planning on hiring employees who are outside the country and you do not have a specific person in mind, I would strongly suggest that you use a temp agency that has an international presence so that they can assume all the “headaches” on your behalf and you can merely deduct their fee from your U.S. S tax work sheets as an operating expense.

Then, should it be the case that you like the employee and wish to permanently use him or her, the employment agency will likely have procedures in place to smooth the transition and give you a “heads up” about legal and tax issues of that person’s origin.

If, on the other hand, you know already who you wish to hire, then I would recommend contacting the closest embassy or consulate of that person’s origin to find out about any special tax or withholding rules.

Likewise, it would also be important to contact your local IRS office before you proceed with your plans so that should anything go wrong, you will have a paper trail to show you acted in good faith and wanted to be in compliance.

 

About the author: David O. Vang, professor, Finance Department, University of St. Thomas

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