Let me preface this by saying I am not an accountant or a tax attorney. I’m simply sharing how we’ve been dealing with taxes and our OFS for years. This is how 5 different accountants have dealt with it for us.
Also, my OFS Jamie is not an accountant. What she shared about taxes is based on her experience paying taxes as an online Filipino worker.
YOU SHOULD NOT LISTEN TO WHAT I’M ABOUT TO SAY. Don’t take it as legal or financial advice!
I got an email from someone recently saying they have two concerns about hiring an OFS (Online Filipino Specialist). One is the taxes. They think hiring an OFS means they’d have to pay taxes because I call my OFS team my employees and offer them benefits.
Their second concern was whether the OFS is an employee or an independent contractor.
Even though I call my team in the Philippines my employees, they are independent contractors. I don’t pay their taxes. These are the only things I need to do tax-wise with my OFS:
1. I have them fill out a W-8 BEN and
2. declare them in my 1120S.
*2021, The IRS updated the W-8 BEN form.
I’ve explored this. I’ve talked to accountants. I’ve talked to attorneys.
I can’t figure any way you could consider an OFS an employee by normal “employee” standards. You can’t give them a w2. They don’t have a US tax ID number. You can’t even give them a 1099.
Having said that, DON’T LISTEN TO WHAT I SAY! Consult your attorney and accountant!
On the Philippine side of things, I asked Jamie about this because she’s been paying taxes as an online worker for years. When she registered as a taxpayer, I remember she asked for a day off because she spent hours in lines just to get her paperwork filed.
They (your OFS) are registered as independent contractors when paying their taxes. They pay a local tax (~1% gross) yearly and national taxes quarterly (~8% over Php25,000). From what Jamie tells me, they can do most of the filing and payment online.
PS. don’t over complicate this.