Tax Considerations When Hiring a Virtual Assistant

Paying employees accurately, timely and in compliance with any state or federal regulations is imperative for small business owners. And it can be a stressful process. To alleviate the burden on administrative teams and reduce liability associated with processing payroll and filing taxes in-house, many SMBs consider outsourcing payroll services or choose a more comprehensive suite of services for their human resources needs, such as Professional Employer Organization (PEO) or Administrative Solutions Outsourcing (ASO).

SMBs that hire foreign virtual assistants (VA), however, have different considerations when it comes to paying employees. Not only must they consider the frequency, currency and payment method for paying their VAs, but they must also navigate tax concerns.

U.S. Tax and Foreign-Based Employees

Here’s what to know about taxes if you hire an overseas virtual assistant.

• SMBs are not obligated to pay U.S. taxes for employees who do not reside in the U.S. and are not U.S. residents. Typically, they are classified as foreign independent contractors.

• Foreign virtual assistants are subject to the tax laws in their domiciled country, not U.S. laws. They are responsible for filing taxes directly in their home country.

To account for your business expenses and remain in compliance with IRS reporting responsibilities, keep track of all invoices and payment transactions for business purposes. When it comes to claiming any deductions, you’ll need to demonstrate how payments were related to your business and offer proof that payment was made.

For specific tax questions and concerns related to your SMB, be sure to consult a professional accountant. And if you need help with payroll and other HR services for your stateside employees, get in touch with us at The OIS Group.