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I'm running a small U.S. business. Some users make profit by referring customers to purchase services from me. I've been told that I have to send form 1099 to both users whom making such profit from me (Affiliate Users), as well as the IRS. However, I have couple of questions regarding that form specifically. I'd appreciate it if someone could shed some light on the following points:

  1. Am I required to send form 1099 to non-US citizens who are not even residing in the US? Since they're not required to file US taxes, do I still have to send the form to them?
  2. Is it fine to expose my ITIN (taxpayer identification number) to individuals or companies who I send the form to them. Since the form requires me to write my TIN/EIN, what would be the risks of this and what precautions should be taken to avoid inappropriate/illegal use?
  3. I send payments via PayPal and wire transfer. Should I send form 1099-MISC or 1099-K?
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Am I required to send form 1099 to non-US citizens who are not even residing in the US? Since they're not required to file US taxes, do I still have to send the form to them?

That's tricky. You need to get W8/W9 from them, and act accordingly. You may need to withhold 30% (or different percentage, depending on tax treaty they claim on W8). If you withhold taxes, you also need to file form 1042.

I suggest you talk to a tax professional.

Is it fine to expose my ITIN (taxpayer identification number) to individuals or companies who I send the form to them. Since the form requires me to write my TIN/EIN, what would be the risks of this and what precautions should be taken to avoid inappropriate/illegal use?

No, it is not OK. But if you pay these people directly - you don't have much choice, so deal with it. Get a good insurance for identity theft, and don't transact with people you don't trust. One alternative would be to pay through a payment processor (Paypal or credit cards) - see your next question.

I send payments via PayPal and wire transfer. Should I send form 1099-MISC or 1099-K?

Paypal is a corporation, so you don't need to send 1099 to Paypal. Whatever Paypal sends to others - it will issue the appropriate forms. Similarly if you use a credit card for payment.

When you send money through Paypal - you don't send money directly to your business counterparts. You send money to Paypal.

  • It is also not clear how much money we are talking about here. You are not required to issue a 1099 if the amount is less than $600 USD, but this may not be so for foreign transactions. – jkuz Mar 23 '16 at 13:58

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