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simensen
Community Member

Tax obligations on the client side

I'm trying to find information on how taxes need to be reported by clients. If I work with individuals directly I know I need to send a 1099 to them. Will I need to send a 1099 to oDesk for all services performed? It sounds like oDesk themselves will send a 1099 (as needed) to the freelancers... I tried to ask oDesk support and I got nowhere useful at all. It was a pretty bad experience, to be honest. ๐Ÿ˜• A little bummed by that. So in short, if I hire someone through oDesk, do I have to send a 1099 to someone? If so, to whom? If not a 1099, is there something else I need to be sending somewhere? Thanks!
54 REPLIES 54


@Jon S wrote:

Hi Team,

 

Based on what UpWork and my tax professional told me, here is the crux issue: my UpWork contractors (in the eyes of the IRS) don't work for me.  They work for UpWork.  

thx,


Well, this is news to me. I was always under the impression that Upwork just considered itself a platform that freelancers and contractors used to find each other (the same way that EBay is a platform that allows buyer and sellers of goods to find each other).  The way you are describing it makes it sound like Upwork is a temp agency.

Hold on a minute. I just had a look at one of the invoices that Upwork generates automatically. It clearly says:

 

From - Freelancer name + her address (not Upwork)

 

Bill to  - My company

 

Therefore, according to the invoice, the freelancer is working for me and I am paying the freelancer, not Upwork. There needs to be consistency here.

Marcia, the invoice is just a document that was generated according to instructions computer programmers were provided by managers who were trying to comply with instructions their supervisors gave them in response to frequent requests from users from all over the world.

 

Specific wording, layout, organization, etc. on this and other documents may or may not relate directly to your own tax situation.

 

You don't need to take it literally if it doesn't apply.

 

I appreciate your desire for consistency, but you are not guaranteed to find it here, or even in publications and communications provided by the IRS and tax professionals.

Anonymous-User
Not applicable

An invoice is never just a document, it is either according to the tax laws in the country of the specific freelancer or not. Upwork should abstain from issueing invoices that are not legal in the freelancer's and/or client's country. This will cause problems for all parties involved later - so for Upwork as well. If I ever will have troubles with my tax authorities because of these invoices I can honestly admit and prove that I have never seen these invoices and that there is no contract where I commissioned Upwork to do this in my name. So I cannot be brought to justice for these invoices I have never seen and could never shape them according to the laws in my country. I issue my own invoices with my VAT-ID and forward VAT where applicable to the tax authorities in order to stay legal. Furthermore, Upwork is the remitter of the invoice and all financial streams go to Upwork first.


@Marcia M wrote:

@Jon S wrote:

Hi Team,

 

Based on what UpWork and my tax professional told me, here is the crux issue: my UpWork contractors (in the eyes of the IRS) don't work for me.  They work for UpWork.  

thx,


Well, this is news to me. I was always under the impression that Upwork just considered itself a platform that freelancers and contractors used to find each other (the same way that EBay is a platform that allows buyer and sellers of goods to find each other).  The way you are describing it makes it sound like Upwork is a temp agency.


Me too, Marcia!

 

However, regardless of how UpWork views itself, I'm interested in the IRS' perspective.  Does anyone have a statement from UpWork, tax pro or IRS to contradict what they told me on the phone and show that we are responsible to also report the contractor's earnings in addition to the reporting that UpWork told me they do?

 

I, like the rest of you clients, want to get this right.

 

And I believe UpWork is almost doing us clients a disservice by not making this clearer.  I can hear the response already, 'we at UpWork not tax professionals.'  But even being clear about the fact that they are reporting the contractors' income would help.

 

Sincerely,

Jon

Current headline:

"The U.S. Internal Revenue Service said on Wednesday it is experiencing computer failure across several systems and temporarily cannot accept many taxpayer returns."

 

So Upwork is not the only large organization that experiences computer system downtime.

 

Maybe we should shelve all discussion of how to pay taxes until we see if the IRS gets their systems working again. If they announce that they are no longer accepting taxpayer returns, this could become a moot discussion.

 

(Of course, this applies the U.S. only. The rest of you can still submit your taxes right now.)

re: I read through the responses Upwork provided on 1099-MISC question from the first client, but I still have cocerns as an US-based client; I dont pay directly to my freelancers. All payment are made to Upwork as shown on my Bank statement. For Tax reporting the 1099-MISC should issued to Upwork since we don't require our freelancers to fill out another W-9 when they are hired since they have this completed with Upwork when they first signed up."

 

Stop being concerned. Maybe you don't understand how Upwork works.

 

You don't need to worry about this.

 

Why do you want to do more paperwork than is necessary or pay more taxes than necessary?

 

Probably. Please tell me how it works.

re: "Please tell me how it works."

 

Okay.

 

Upwork provides business-to-business services. Upwork provides you an opportunity to puchase services from independent businesses. When you hire somebody to do a job for you, you are not hiring an employee. You don't owe taxes for the people you hire.

 

Upwork does send out any legally required 1099 forms. Upwork does require freeelancers to send W-9 forms to them.

 

Upwork clients should not asking freelancers to send W-9 forms. Client should not send 1099s. That would be redundant.

Thanks for the clarification. This will be redundant for the freelancers; however to keep our business  accounting updated; 1099 should be issued to Upwork as our  main vendor of the freelancer services.  Up to Upwork to issue 1099 to its freelancers. Your thoughs?

 

 

You really should not be issuing a 1099 to Upwork. You need to classify your payments to Upwork differently. Like as office supplies or something. Upwork is not a freelancer.

I think you should bring this question to the Management team. Classify "my payments to Upwork as office supplies or something " does sound too good to me since Upword does not sell office supplies. I beleive the Management should look into this further for the benefit our your clients.  

vladag
Community Manager
Community Manager

Hi Global Language Sy L,

 

Please contact Customer Support and our team will help respond to your concerns and questions.

 

Thank you.

~ Vladimir
Upwork


@Global Language Sy L wrote:

I think you should bring this question to the Management team. Classify "my payments to Upwork as office supplies or something " does sound too good to me since Upword does not sell office supplies. I beleive the Management should look into this further for the benefit our your clients.  


Upwork does not sell anything to you. Upwork sells services and the use of this website to freelancers. We pay them out of our earnings for this service. You are buying services from individual contractors who perform tasks for you. The services you buy should be registered as external services of some kind such as translation services or IT services depending on what the job was. Preston is being obtuse when he reccomends registering it as office supplies. He's knowledgeable in many areas, but I wouldn't take his advice when it comes to taxes.

 

As far as you're concerned, Upwork is a payment processor that gives you the opportunity to post a job and find independent contractors. The money you pay through Upwork is exactly the same as money you might pay to a contractor using PayPal. You are not paying the money to PayPal or Upwork, you are paying it to the contractor who holds the relevant account with the payment processor.

 

I hope this clears things up for you. It's unfortunate that it only says UPWORK on your bank statement, so you might have to keep your own records for which contractor you paid for which job and attach that to your record of payment. The invoice you receive from Upwork should be in the freelancer's name and might be good enough.

re: "He's knowledgeable in many areas, but I wouldn't take his advice when it comes to taxes."

 

I think it would be vey foolish to take Preston's advice on taxes.

 

But in Preston's defense, taxes are icky.

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