John Jonas explains how US employers handle taxes when hiring Philippine contractors. You don't file 1099s or pay Philippine taxes. Instead, get a signed W-8BEN, collect monthly invoices, and deduct payments as subcontractor expenses on your 1040.
Questions this episode answers
No — the host says there is no 1099 to submit because the contractors are not in the U.S.
W-8BEN (signed by the contractor).
A monthly invoice from each contractor to create a paper trail.
As "subcontractors" listed under other deductions on the US 1040, totaling the amounts paid for the year.
No — the host states you are not required to submit anything to the Philippines government for those contractors.
Chapters
Hello and welcome to the Secret Sauce of Outsourcing Podcast, the podcast that's dedicated to making you better at outsourcing your work. My name is John Jonas and this is episode eight. How do we deal with taxes and what tax implications are there? I need to preface this episode by saying I am not an accountant or a lawyer. I am not qualified to give you any tax advice. You should not listen to anything I'm about to say. You should definitely go talk to your own CPA or your tax attorney. Talk to a professional, because I'm not that person. However, I've been doing this since 2005, and I've worked with a lot of different account accountants and every one of them has done the same thing. And I've had a lot of different customers of ours say, I'm worried about taxes and I don't know that you're right. And they go to their accountant and in the end their accountant can't figure out anything else than what I'm telling you. So here's what we do. Number one, there is no 1099 to submit. They're not in the U.S. the U.S. government doesn't care about their income in the Philippines. They are required to do their own taxes. And you don't really need to be involved in that. And you don't need to. You're not a Philippines business. You're not required to submit anything to the Philippines government. There are two things that we do. Number one, when someone starts working for us, we require a W8 BEN. It's a form that says they are an independent contractor and not an employee and they work on their own. Super simple. You get it, get it signed for your own records. Number two, Actually, there's three things. Number two, I require an invoice every month from my people so that I have a paper trail. So they send me an invoice and then I pay them. Number three, at the end of the year, when we file our taxes under the other deductions, which on the 1040 requires, in the US requires a statement attached. We create a line that says subcontractors and we just fill out how much we paid all of our people in the Philippines and that's it. It's a tax deduction. There's not really a tax treaty that we're worried about between the US and the Philippines. Now, this may change over time, but so far it hasn't. So so much simpler than hiring someone locally. There's no government regulations to deal with. There are no taxes for you to pay. It's a tax deduction. You don't really have to deal with labor laws. You don't need to post something up in your workplace. So it's super, super simple. If you have more questions about it, you can see exactly how we do it on our taxes at onlinejobs. Ph Taxes. There's a really good article that we've written about it with screenshots and examples of how it's done. So my name is John Jonas. Thanks for listening to this about how to handle taxes with a Filipino virtual worker.
