I’m an independent contractor who receives a small amount of income from Canada. This year, about three thousand dollars. The IRS doesn’t know how to deal with this and no online tax service can process my taxes. This same situation undoubtedly faces tens of thousand of Americans in the new economy, especially those in the gig workforce.
The problem is that I am an independent contractor who receives no form or statement of income from my boss. He’s under no obligation to do so and there appears to be no Canadian form for him to fill out in the first place. He also has contract workers in the Philippines for different lengths of time which would mean he’d probably need something country specific, a form tailored for every government a contract worker might be living under. Not realistic. I’ve had this problem before.
In 2007 and 2008 I sold magazine articles to publishers in Norway, Germany and Japan. One article sold for over $2,000. Never got a tax form from any of these companies and I don’t recall how I reported this income to the IRS. But I must have as I have never been contacted by the IRS over this.
Returning to the present and backing up, here’s an explanation of an independent contractor:
“An independent contractor is someone who is working for someone else and who provides services, but who is not an employee. An independent contractor is typically a creative professional or technical person, like a designer, web expert, or IT professional. The independent contractor receives a 1099-MISC form at the end of the year, instead of a W-2, showing total income received from companies for whom the contractor has worked.”
I have no form from my foreign employer. And I am not subject to self-employment tax as the money I get has no relation to help fund the social security system of the United States. And my Canadian employer does not contribute taxes to that system, either. Instead, I always pay taxes based on my overall income. Self-employment tax, by the way, would require an American employer to send the right form but again, I have no form and no American employer.
Another option would be to declare myself a sole proprietorship which is not what an independent contractor is:
“A sole proprietor is the default business type, for income tax purposes. If you start a business, count business expenses and income separately from personal expenses and income, and you do nothing to register your business with your state, you’re a sole proprietor.”
The IRS has a section for reporting income if one is an employee for a foreign business but I am not that, I am on no payroll, I am a contract worker.
This reminds me greatly of when I was in the California Conservation Corps. Two of us were fired without any kind of due process, even though we were working as employees for the state. Had our checks issued by the State. The California State Employees Association originally expressed interest in helping us out. Their legal team, however, eventually decided that despite how our checks were signed, we were neither independent contractors nor civil service state employees. They stepped away from helping and we engaged a poverty law firm.
The result? A seven year lawsuit against the state which my friend and I eventually won. The question of employee status, though, was never addressed when the appeals court finally awarded us damages. Gray areas exist throughout the law and are sometimes never settled.
How have I handled this in years past? I gave up on online filing services and instead would mail the IRS a 1040 that was partially filled in. I included a printout of my invoices to make sure I disclosed all of my income. Then I wrote a little note apologizing for not correctly filling out the form and should they need any more money than what I sent, or if they had questions, send me a letter.
They have not protested this method so far, although I am sure they are not overjoyed with completing a taxpayer’s form themselves. I usually get a small refund each year. I tried again just now to file online, hoping that perhaps the IRS and online preparers had caught up with the rest of us global-wide workers. They haven’t.
Back to snail mail, an incomplete form, my paper invoice copies, and a handwritten note. I have always tried to do the right thing and tonight I made a tremendous effort in time and frustration in trying to file online. But nothing works since the categories that exist don’t relate to my situation. Online support can’t help. Total waste of time and a bad signal to all of us in the new workforce.
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