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0 pointsshagie3y ago0 comments

Say you do it... the company pays you $100/h (making up a number to do math) and $70 of that goes to the person who does the job while you keep $30 of it.

Guess how much gets reported to the IRS that you're making and how much taxes you'll owe on that $100/h.

Next there's the fraudulent representation of who is doing the work to the client.

Lastly, there's the "this is a form of money laundering" and you're taking a significant role.

When this starts to unravel, you're not going to come out ahead.

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yardstick3y ago

I’m not in the US, and playing devils advocate here: but don’t most employers withhold tax at source before paying to the employees? Ie your 30/70 cut would be net after tax.

Or if it was a contracting scenario, wouldn’t the US person be able to claim the 70/hr as an expense against taxes? Since wages are a valid business expense if you are outsourcing.

I use the term wages loosely here. The IRS does not consider wages/salary performed by people fully living outside the US (except US citizens) as wages within the US tax system, and so is not taxed by the US.

So it really comes down to how the agreements between parties are structured.

shagieOP3y ago

If you are a contractor, you are likely doing your own taxes. If you are a FTE (Full Time Employee) the approach of "sub contract it out" gets you in much more trouble.

As a contractor, the company tells the government "we paid John $200,000 for work at $100/hour and 2000 hours" and then the government comes to you and says "You were paid $200,000 and the federal tax on that is $40,811" (and the state comes and says that their rate will be another $15,000).

If you are acting as a contracting company rather than an individual, then the company wouldn't have said "we paid John" but rather "we paid JohnCorp" as the business to business invoicing is different than working as a contractor.

You sent the money out of the country - the IRS doesn't care too much about that. You got paid $100/hour, that's the end of the story from the IRS's perspective as an individual filing.

In the examples given in this thread it is about an individual farming off some (or all) of the work to another person and presenting the work as their own to the company. This is a different arrangement than a "I am the liaison / representative for a team of people who work cheaply for me."

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