Canadian company hiring independant sales contractors in the US
We are a Canadian company looking to hire commission based sales reps out of the US.. The sales reps would represent the company name to sell web based digital services. Checks would be made out to our company name and we would mail out their commissions.
They would be independent contractors responsible for filing their own income tax========>Correct; they need to file Sch C/SE and also need to pay self-employment taxes and quarterly estimated taxes to the IRS/ their states as 1099 independent contractors.They are not an independent contractor if they perform services that can be controlled by an ER,i.e., what will be done and how it will be done. This applies even if they are given freedom of action. What matters is that the ER , the company, has the legal right to control the details of how the services are performed.However, aslongas an employer-employee relationship exists regardless of what the relationship is called,they are not an independent contractors and their earnings are generally not subject to Self-Employment Tax/ estimated taxes.
However, your earnings as an employee may be subject to US FICA (Social Security tax ) and income tax withholding for both irs/ state.
What forms would they be required to fill if any ?====>> As U.S. citizens or residents, they must file the U.S. tax return if they meet the filing requirements.They must report their world-wide income even the income on which they paid the taxes in the foreign country. If their ER pays tax(es) on their income to CRA, then they can get credit for the taxes paid in Canada; they need to file Form 1116 to claim foreign tax credit on 1040 line 47 or itemize it on Sch A line 8 and on their state returns too. The need to file federal form 1040 and their own state return forms to report the foreign income that they earn from Canadian firm.