Fiverr Forum

Tax/Regulatory Implications of BUYING Fiverr services


#1

I haven’t been able to find any really clear document that summaries this. I see a lot of discussion about tax issues for sellers but not what I’m looking for that concerns buyers.

If I were to (as a random example) hire Jane to come to my business office and do graphic design work for my company, she would be an employee and I would be obligated to file payroll taxes and provide her with a W-2 and also would have state employment filings, etc. It’s a big complicated obligation and paperwork process to have employees under US Federal and most US State laws. I don’t even remotely need enough graphic design work to make this worth the effort. I don’t want to hire an employee to do graphic design.

If, on the other hand, I pay Jane to do some graphic design work for me and she works out of her own home then she’s not my employee. However, my understanding is that if I hire her directly I am still obligated to create and send her a 1099 form for her services. Again, this is something my company only occasionally might need. The expense of having a CPA deal with the federal and state forms out makes it not worth getting an independent subcontractor that we have any obligation to track or report payments to on that basis.

So is there not some clear and concise document that Fiverr provides in their support section somewhere on their website that states “when you pay for a Fiverr gig you (if you are an individual) or your company (if you are using this service for your business) are NOT in any way creating an employee/employer relationship and you are NOT creating a subcontractor relationship and here’s the relevant IRS and state codes that discuss this” or something of that nature?

There are quite a few Fiverr gigs that seem like they would be useful, but the last thing I want to do is create a ton of work for us or my CPA by using the services listed here.


#2

This would be correct if you paid Jane directly, but on Fiverr, you don’t. You pay Fiverr for services rendered.

Under the Internal Revenue Code Section 6050W, you don’t need to file Form 1099-MISC for freelancers paid through Fiverr because you’re not paying your freelancer directly. When you pay through Fiverr, you actually pay Fiverr’s accounting department to hold your funds in escrow and then transfer it to a freelancer if the transaction is completed. Fiverr acts as a “third party settlement organization” under Section 6050W. Fiverr provides freelancers with records of everything they make so they can file taxes as needed. You can use your Fiverr buyer records to collect the numbers and info needed to show how much you paid annually to the third party settlement organization.

Ask your CPA or anyone who is an expert in financial law in the U.S. and they can clarify IRS Code Section 6050W and the issue of third party settlement organizations. If your CPA wants an invoice, see this:

https://buyers.fiverr.com/en/article/viewing-invoices


#3