Payment problem with an agency in the U.S.
Thread poster: Pavle Perencevic

Pavle Perencevic  Identity Verified
Canada
Local time: 16:18
Member (2002)
Serbian to English
+ ...
Dec 3, 2009

Sorry about the long post.

I have a problem with an agency in Nevada. I’ve done a total of six jobs for them so far. They made full payments for the first four, although they were late.

Now they claim they have to withhold part of the money they owe me for the last two jobs on account of having to pay their own taxes. Here's what they said: “We have spoken to our accountant and the IRS regarding how much we should withhold in taxes for payments made for your work
... See more
Sorry about the long post.

I have a problem with an agency in Nevada. I’ve done a total of six jobs for them so far. They made full payments for the first four, although they were late.

Now they claim they have to withhold part of the money they owe me for the last two jobs on account of having to pay their own taxes. Here's what they said: “We have spoken to our accountant and the IRS regarding how much we should withhold in taxes for payments made for your work, our accountant and IRS suggest we withhold 30% for tax purposes in the U.S. for payments made to you since we have to declare this in our taxes for 2009. This 30% will be taken out of this payment based on all payments made to you for prior work”. I told them that I am not responsible for whatever taxes they have to pay, just like they’re not responsible for my taxes, and that I expected them to pay the full amount stated in my invoices. In particular, their own contract states the following: “It is understood that the Company will not withhold any amounts for payment of taxes from the compensation of translator hereunder.”

A few sentences later, though, the contract also states that “Any and all sums subject to deductions, if any, required to be withheld and/or paid under any applicable state, federal or municipal laws or union or professional guild regulations shall be translator’s sole responsibility and translator shall indemnify and hold Company harmless from any and all damages, claims and expenses arising out of or resulting from any claims asserted by any taxing authority as a result of or in connection with said payments.” I’m not sure if this can constitute the basis for their “withholding” part of the money they owe me, and if so, how this squares with the previously quoted sentence.

A few days later they said: “We have been advised by our accountant to ask you for your company tax ID and that according to US/Canadian treaty we should retain 10% tax for your services as opposed to 30%” I said I had no knowledge of such treaty and reiterated that I expected to get paid what they owe me in full.

Yesterday they sent me an email saying that “A check should be there soon minus 10%, it was mailed out along with an explanation why a tax id number must be provided. If a tax id is not provided we will be forced to hold on to last payment owed and apply it towards taxes. That is the law [THE COMPANY’S NAME] is simply following it.”

I have worked with many U.S. agencies and have never been paid anything other than the full amount specified in my invoices. No one has ever “retained” or “withheld” any percentage of my payment, whether the payment was made to me as an individual or to my company. I am no legal expert, but I doubt the existence of the alleged law this company invokes or any “US-Canadian treaty” dealing with these issues. However, I would like to hear from fellow Canadian translators if they have knowledge of such laws and if any of them has ever found themselves in this type of situation. I want to make sure my bases are covered before I take any further steps, including legal action, against this agency. The amount in question is not exactly trifling.

Thanks in advance!
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Brandis (X)
Local time: 01:18
English to German
+ ...
Nothing to be sorry about... Dec 3, 2009

Hi! this has been happening all the time, U.S agencies from Nevada are no exception. When the customer fails to give you enough lead to finish the project as per his specification, he infact trying to pay less or not at all. These are usually beginners in the industry. There should be some mechanism to filter out such people, may be at portal level like here. The problem begins with the fact that you give them a 30 if not a 60 days credit, finish the object and deliver on time, the just change a... See more
Hi! this has been happening all the time, U.S agencies from Nevada are no exception. When the customer fails to give you enough lead to finish the project as per his specification, he infact trying to pay less or not at all. These are usually beginners in the industry. There should be some mechanism to filter out such people, may be at portal level like here. The problem begins with the fact that you give them a 30 if not a 60 days credit, finish the object and deliver on time, the just change a word here and there and not pay you. I have myself seen many such cases. ...... There is somuch I can write about the non-payment practises and there is a BB too. Apparently nothing helps much. BrandisCollapse


 

Katalin Horváth McClure  Identity Verified
United States
Local time: 19:18
Member (2002)
English to Hungarian
+ ...
What the =(%! are they talking about??? Dec 3, 2009

I think their accountant is delusional.
If you are not a resident of the USA, they do not have to (should not) withhold anything.
You have to send them a form W8, download it from here.

http://www.irs.gov/pub/irs-pdf/fw8ben.pdf

Check the box at 9a, write Canada in that line.
Do not write anything to 10, leave it blank.

Send them this ASAP,
... See more
I think their accountant is delusional.
If you are not a resident of the USA, they do not have to (should not) withhold anything.
You have to send them a form W8, download it from here.

http://www.irs.gov/pub/irs-pdf/fw8ben.pdf

Check the box at 9a, write Canada in that line.
Do not write anything to 10, leave it blank.

Send them this ASAP, this should make the accountant understand what is going on and fix the situation.
(If not, they should fire him - or they are simply lying to you.)

Katalin

P.S: I think their accountant is thinking in the framework of US-based freelancers - in that case, they need to have a W9 on file for each freelancer, stating their tax ID or SSN, and they issue Form 1099s for them at the end of the tax year. The accountant probably couldn't find a W9 form or your SSN in their files - for obvious reasons, you have not given it to them - so he/she is blindly following the rules - instead of asking you to provide the W8 form (not W9). As to your past experience with US agencies - this issue may not come up if the total payments throughout the year do not reach the minimum amount the IRS specifies - last time I checked it was $600.00. If you get less than that in a year, the agency is not required to issue a 1099, therefore they do not ask for your SSN and W9 (or W8) form.

[Módosítva: 2009-12-03 15:27 GMT]
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NancyLynn
Canada
Local time: 19:18
Member (2002)
French to English
+ ...

Moderator of this forum
Tax exemption Dec 3, 2009

Hi Pavle,

Did they provide you with a W-8 form to sign and return? Every single US agency I've worked with has required this form. I've never heard of the situation you describe.

Nancy


 

Kathi Stock  Identity Verified
United States
Local time: 18:18
Member (2002)
English to German
+ ...
W-8BEN form Dec 3, 2009

You may check this out:
http://taxes.about.com/od/taxplanning/qt/form_W8BEN.htm

The treaty in question is the double taxation treaty between the U.S. and Canada.

Hope this provides at least some more information.

Kathi


P.S. We had the topic on proz before: See more
You may check this out:
http://taxes.about.com/od/taxplanning/qt/form_W8BEN.htm

The treaty in question is the double taxation treaty between the U.S. and Canada.

Hope this provides at least some more information.

Kathi


P.S. We had the topic on proz before: http://www.proz.com/forum/business_issues/18242-need_help_with_w_8ben_from_canadian_colleagues.html

[Bearbeitet am 2009-12-03 15:20 GMT]
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Pavle Perencevic  Identity Verified
Canada
Local time: 16:18
Member (2002)
Serbian to English
+ ...
TOPIC STARTER
W-8BEN form Dec 3, 2009

I did actually sign a W-8BEN form, and they received it either by fax or as a scanned file - I can't remember now. But they do have it.

Not every U.S. agency has asked me to complete this form, but neither those who did nor those who didn't have ever "withheld" any portion of my payment. This is a first for me.


 

Katalin Horváth McClure  Identity Verified
United States
Local time: 19:18
Member (2002)
English to Hungarian
+ ...
Remind them, or send the form again Dec 3, 2009

If you have sent it last year, they may have buried it in last year's tax documentation.
I have clients that ask for a W9 every year (even though the previous one should be valid).
Sending a new one may be a good idea anyway, in case you checked something incorrectly on the previous form (do you have a copy to check)?

Katalin


 

Pavle Perencevic  Identity Verified
Canada
Local time: 16:18
Member (2002)
Serbian to English
+ ...
TOPIC STARTER
Thanks Katalin! Dec 3, 2009

Katalin Horvath McClure wrote:

If you have sent it last year, they may have buried it in last year's tax documentation.
I have clients that ask for a W9 every year (even though the previous one should be valid).
Sending a new one may be a good idea anyway, in case you checked something incorrectly on the previous form (do you have a copy to check)?

Katalin


I sent it this year, but I will send it again. I just want to make sure I did it right in the first place. Should I enter "I certify that the beneficial owner is a resident of Canada" under Part II (9)? I don't think I've ever checked that box before. I would just complete Part I and sign it on the dotted line (although I've never had any problems in the past because of that). Is there any other info I should enter in this form? How about this "Foreign tax identifying number, if any (optional)" under Part I (7)? I'm not sure my company actually has one as I only started it in September this year and it's a sole proprietorship.



[Edited at 2009-12-03 16:46 GMT]


 

sarandor  Identity Verified
United States
Local time: 19:18
English to Russian
+ ...
They are totally wrong Dec 3, 2009

I can't imagine IRS advising them to withhold any taxes from payments made to independent contractors. It doesn't matter whether contractor resides in US or abroad. The question is: are they honestly misinterpreting information given by IRS or just trying to take advantage of you.

 

Pavle Perencevic  Identity Verified
Canada
Local time: 16:18
Member (2002)
Serbian to English
+ ...
TOPIC STARTER
situation much clearer, with some residual confusion Dec 3, 2009

Nancy Lynn Bogar wrote:

Hi Pavle,

Did they provide you with a W-8 form to sign and return? Every single US agency I've worked with has required this form. I've never heard of the situation you describe.

Nancy


Hi Nancy,

I did some research in the meantime, and I think I now know what they did wrong. I checked the US-Canadian treaty. It turns out that withholding of taxes applies to those who perform "independent personal services in the other Contracting State", and not to foreign nationals who provide such services outside the U.S. I will complete the W-8BEN form again. There's just a few more things I find confusing, and I don't find the IRS instructions very helpful either. I would like to enter the name of my company under (1) as I want checks to be paid to my company, not to me personally. However, I don't know which box to check under (3) as I don't see "sole proprietorship" there? Also, should I leave (7) blank or enter my SIN?

Any advice will be greatly appreciated


 

Katalin Horváth McClure  Identity Verified
United States
Local time: 19:18
Member (2002)
English to Hungarian
+ ...
How to fill in the form Dec 3, 2009

I am not a tax adviser, so this is my layman's advice based on reading the instructions on the W8 and from experience.

First of all, what do you mean by "name of your company"? Are you properly incorporated under Canadian law? Or do you just use a business name, perhaps based on a DBA filing (DBA: Doing Business As - I am not sure if there is an equivalent of this in Canada), in which case you are not a company?
If you are properly incorporated, then you use your company name
... See more
I am not a tax adviser, so this is my layman's advice based on reading the instructions on the W8 and from experience.

First of all, what do you mean by "name of your company"? Are you properly incorporated under Canadian law? Or do you just use a business name, perhaps based on a DBA filing (DBA: Doing Business As - I am not sure if there is an equivalent of this in Canada), in which case you are not a company?
If you are properly incorporated, then you use your company name in 1, write the country of incorporation (Canada) to 2, and check the box for "Corporation" in 3. If you are not, then you are an "Individual", write your name to 1, leave 2 blank and check Individual under 3.
4 is straightforward, so is 5.
Leave 6 blank.
As for 7, if you are an individual, you can put your social security number there, but this is optional. If you are incorporated, I believe you must have a tax ID for Canada, but again, providing it in line 7 is optional.
Leave 8 blank.
Check 9a, write Canada, leave other check boxes blank.
Leave 10 blank.
Leave 11 blank.
Sign, date and write "self" to Capacity in which acting.

I hope this helps.
Katalin




[Módosítva: 2009-12-03 21:54 GMT]
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Pavle Perencevic  Identity Verified
Canada
Local time: 16:18
Member (2002)
Serbian to English
+ ...
TOPIC STARTER
Thanks again for your detailed explanation, Katalin! Dec 4, 2009

When it comes to filling out forms, my eyes glaze over... This is exactly the info I needed. No, I'm not incorporated. My business is a sole proprietorship, and it's [NAME OF PERSON ]"operating as" [NAME OF SOLE PROPRIETORSHIP] in Canada, so I'll just enter my name under (1).


Katalin Horvath McClure wrote:

I am not a tax adviser, so this is my layman's advice based on reading the instructions on the W8 and from experience.

First of all, what do you mean by "name of your company"? Are you properly incorporated under Canadian law? Or do you just use a business name, perhaps based on a DBA filing (DBA: Doing Business As - I am not sure if there is an equivalent of this in Canada), in which case you are not a company?
If you are properly incorporated, then you use your company name in 1, write the country of incorporation (Canada) to 2, and check the box for "Corporation" in 3. If you are not, then you are an "Individual", write your name to 1, leave 2 blank and check Individual under 3.
4 is straightforward, so is 5.
Leave 6 blank.
As for 7, if you are an individual, you can put your social security number there, but this is optional. If you are incorporated, I believe you must have a tax ID for Canada, but again, providing it in line 7 is optional.
Leave 8 blank.
Check 9a, write Canada, leave other check boxes blank.
Leave 10 blank.
Leave 11 blank.
Sign, date and write "self" to Capacity in which acting.

I hope this helps.
Katalin




[Módosítva: 2009-12-03 21:54 GMT]


 

Nicole Schnell  Identity Verified
United States
Local time: 16:18
English to German
+ ...
In memoriam
Exactly. Dec 4, 2009

Galia Williams wrote:

I can't imagine IRS advising them to withhold any taxes from payments made to independent contractors. It doesn't matter whether contractor resides in US or abroad. The question is: are they honestly misinterpreting information given by IRS or just trying to take advantage of you.


There is no such thing as withholding taxes from any freelancers, vendors or any other business associates, domestic or foreign.

I will be happy to provide our CPA's contact information via personal email (she is specializing in international business).

BR,

Schnell Creative Group, Inc.


 

Daniele Heinen  Identity Verified
Canada
Local time: 19:18
Member (2006)
English to French
+ ...
Paperwork for non US Translators working with US entities May 14, 2010

Lots of B.. S... flying around coming from US agencies and ignorantus accountants

1) a 1099 that reports income paid over 600 $ to any freelancers cannot apply to someone outside the US for the very simple reason that you cannot, by definition provide a US social security number; so forget the W9. Do not attempt to make the problem go away to enter you Canadian NAS because it is also 9 digits. You will get into more problems as your number will bomb into the IRS system .

... See more
Lots of B.. S... flying around coming from US agencies and ignorantus accountants

1) a 1099 that reports income paid over 600 $ to any freelancers cannot apply to someone outside the US for the very simple reason that you cannot, by definition provide a US social security number; so forget the W9. Do not attempt to make the problem go away to enter you Canadian NAS because it is also 9 digits. You will get into more problems as your number will bomb into the IRS system .

2) W8-BEN does not apply even though it is constantly used. Read the instructions that goes with it. .... US sourced income such as dividends interests etc...... There lies the common confusion. Sourced income is income earned in the place where you are located, not WHO PAYS the invoice. (Othewise I personnaly would have at 5 least 5 tax retun to fil in 5 differnt countries)

An overseas translator Canadian or otherwise vis a vis the US sources his/her income from where he/she is located not from where the invoice is paid.
So your work is done in Canada, it is Canadian sourced income . PERIOD!!!!

Basically, your Client is trying to establish that you are not oocated in the US and therefore they don't have to report you on a 1099; fine but in the absence of any official form for such from the IRS, the W8-BEN is used instead, and should not as it is inapplicable.

It is not without consequences to fill an inapplicable form with the IRS and it is not without consequnces for you to attract the attention of the IRS, considering : tax treaty between the US and Canda and all the exchange of information that goes between the 2 countries.

An invoice that gives a foreign adress should be enough. And do not charge GST or PST as it is an export for you.


Any
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