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My US based LLC hired an independent contractor from China for some film work. Taxes were not withheld from the contractor’s payment. They will get a 1042-S to indicate this. As a nonresident alien with US income (and assuming no other income from the US), will the contractor need to file a US tax return? Or, can they simply report in China? The total amount paid to the contractor was $1500.

In researching this question, I found this Taxation of Nonresident Aliens page from the IRS. It seems wages "less than the personal exemption amount" would not require the contractor to file a US return. Does that apply here? If yes, what is that amount?

Updates

  1. The independent contractor worked remotely from China.
  2. Wikipedia says that "The Tax Cuts and Jobs Act of 2017 eliminates personal exemptions for tax years 2018 through 2025."
  • Of course Uncle Sam wants taxes on his income. what makes you think it would be fine if he instead pays chinese taxes?? that money goes to China, not to the IRS. – Aganju Feb 14 at 15:35
  • That is why I'm asking :) The question is more about if they need to file a return in the US though. Can you comment on the Taxation of Nonresident Aliens paragraph? – JWK Feb 14 at 16:09
  • Separately, if US tax was withheld, would the contractor not get double taxed in China under the tax treaty? I guess that's a different question. – JWK Feb 14 at 16:10
  • That depends on the tax treaty - if there is any. Worst case, he will be double taxed. Nobody said the world is fair. – Aganju Feb 14 at 16:54
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    @Aganju, if the contractor isn't a US citizen and didn't do any work in the US, why would the US have authority to tax their work? (OP, did the contractor actually come to the US to do the work, or did they do the work in China?) – The Photon Feb 14 at 18:58
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Following links from the link you included in your question gets to this page:
https://www.irs.gov/pub/irs-pdf/p501.pdf

The amounts differ by various factors, but the lowest amount is $12,000, so if you made less than that, you don't need to file.

Also, the IRS determines the source of "Salaries, wages, other compensation" by where the services are performed. https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-source-of-income If the contractor is not a US citizen, does not hold a US green card, does not visit the US, and receives their income exclusively from services performed outside the US, then they do not owe any US taxes on their income.

  • Very helpful, thanks. Your point about US source income is a good one. I just found “Publication 515 (2018), Withholding of Tax on Nonresident Aliens and Foreign Entities” which says “Compensation paid to a nonresident alien (other than a resident of Puerto Rico, discussed later) for services performed outside the United States is not considered wages and is not subject to withholding.” irs.gov/publications/p515. I think this is enough to confidently answer the question—a return does not need to be filed by the contractor. – JWK Feb 14 at 23:11

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