Navigating Tax Reporting as an Independent Contractor for a Canadian Company

As an American individual, you may have been consulting for a Canadian company and were not issued a 1099 NEC form. This situation can be common, especially when dealing with foreign companies. Let's break down the key points to understand your tax obligations and how to handle such scenarios properly.

Understanding the Lack of 1099 Form

No Canadian companies and most international businesses, except those in the United States, do not issue US tax forms like the 1099 NEC. The responsibility falls on you to track your earnings and report them accurately to the Internal Revenue Service (IRS).

Being an independent contractor, the 1099 form indicates that you are not an employee but an independent business entity. The term '1099 employee' is incorrect. Your own knowledge of your income is crucial for tax reporting. The phrase 'I didn’t get a 1099' does not serve as a valid excuse with the IRS; you must know the amount you earned.

If you didn't receive a 1099 form, it might be embarrassing, but it’s necessary to ask the foreign company for the amount they paid you. They are responsible for providing legitimate documentation. Typically, the Canadian company would give you a T4A slip, which is equivalent to a US 1099, detailing the payments made to you.

Proper Reporting of Earnings

When you work for a foreign company, especially a Canadian one, you are responsible for reporting your income accurately to the IRS. The Canadian company might not need to issue a 1099-NEC, but you must still report your earnings. The IRS Small Business and Self-Employed Tax Center provides resources to help you understand the requirements.

One method to track your income is through your bank account deposits. If payments were deposited into your bank, you can easily determine how much you were paid. Maintaining detailed records of your transactions and receipts is crucial.

The Role of a Tax Professional

Given the complexity and potential discrepancies in international tax reporting, consulting with a tax professional is strongly advised. A tax advisor can help navigate the various aspects and issues related to working with a foreign company, ensuring compliance with both Canadian and US tax laws.

A Canadian company is not mandated to issue a 1099-NEC to independent contractors. Instead, the independent contractor is responsible for keeping records of the payments received and reporting the business income on Schedule C of Form 1040. Even without a 1099-NEC, you can use your own invoices and supporting documentation to demonstrate the accuracy of your income.

Conclusion

If you are an independent contractor working for a Canadian company, you are responsible for keeping track of your income and reporting it accurately. Despite not receiving a 1099 form, you still need to prove your earnings through proper documentation and records.

By staying informed and consulting with a tax professional, you can ensure that your international income is reported correctly, minimizing any potential tax issues.