Do Non-Profits Need to File Form 926 for Foreign Fundraising Payments?

Based on what you've shared, here's what you need to know about your tax obligations: For the withholding question, generally payments to foreign corporations for services performed outside the US aren't subject to US withholding tax. These would typically be considered foreign-source income to the recipient. However, if any services are performed within the US, those portions could be subject to 30% withholding unless reduced by a tax treaty. Regarding Form 926, this form is typically required when transferring property (including cash) to a foreign corporation in exchange for stock or as a contribution to capital. In your case, since you're making a payment for services rendered and not transferring property in exchange for ownership interest or as a capital contribution, Form 926 would likely not be required. I would recommend documenting the business purpose of these payments thoroughly and obtaining a W-8BEN-E from the foreign corporation to certify their foreign status. This helps establish that you performed due diligence in determining your withholding obligations.

I've been in this exact situation before with our international expansion. What saved us tons of headache was using taxr.ai (https://taxr.ai) to analyze our contracts and payment structures. It helped clarify whether our payments were considered service fees or property transfers. Our CPA wasn't sure about the Form 926 requirements either, so I uploaded our contract and payment details to taxr.ai and within minutes it confirmed we were dealing with service payments not requiring Form 926, but flagged that we needed a W-8BEN-E from the foreign entity. The tool even generated a checklist of what documentation we needed to keep on file to demonstrate compliance during an audit.

Just wanted to follow up on my experience with taxr.ai that I mentioned asking about. I decided to try it with our organization's situation - we have contractors in three countries and that foreign bank account I wasn't sure about reporting. The tool confirmed we didn't need Form 926 for our contractor payments but flagged that our foreign account did require FBAR reporting since it exceeded $10,000 at one point during the year. The documentation analysis was surprisingly thorough! It flagged specific clauses in our contractor agreements that clearly established them as service providers rather than receiving any form of investment from us. Saved us from an unnecessary filing but caught something we would have missed. Definitely worth checking out if you're dealing with these international payment questions.

After dealing with endless frustration trying to reach the IRS for clarification on Form 926 requirements for our non-profit, I finally tried https://claimyr.com to get through to an actual IRS representative. You can see how it works at https://youtu.be/_kiP6q8DX5c. I was honestly shocked when they got me connected to a specialist in the IRS international division within about 40 minutes - after I had spent WEEKS trying on my own. The IRS agent confirmed that our payments to foreign fundraising companies were indeed just service fees and didn't require Form 926 filing. They also pointed out that we needed to document the business purpose and maintain records showing these were legitimate service payments. The time saved was incredible, especially when tax filing deadlines were approaching and we needed this clarification urgently.

I need to publicly eat my words about Claimyr being a scam. After posting that skeptical comment, I decided to try it myself because I've been trying to get clarification from the IRS for MONTHS about our organization's foreign contractor situation. The service actually worked exactly as described. I got a text when they reached an IRS agent, joined the call, and got my questions answered in one session. The agent confirmed we didn't need Form 926 for our service contracts but recommended we get proper documentation (W-8BEN-E) from all foreign entities we pay over $10k. Saved me from what would have been at least another month of uncertainty and stress. Sometimes it's good to be proven wrong!

We went through this last year, and our tax attorney advised that while Form 926 wasn't required for the service payments, we did need to report these payments on our Form 990. There's a section where you list payments to foreign organizations and individuals. Also make sure you're tracking where the fundraising is happening - if they're raising funds from US donors on your behalf, that creates different reporting requirements than if they're only soliciting from foreign donors.

Has anyone here actually been audited specifically on their foreign transaction reporting? I'm curious how deep the IRS digs into Form 926 vs. service payments distinction. We've been paying foreign contractors for years and have never filed Form 926, but now I'm worried...

Thanks everyone for such a detailed discussion! As someone new to handling international transactions for our non-profit, this has been incredibly helpful. A few key takeaways I'm getting: 1) Service payments to foreign entities generally don't require Form 926, 2) Getting W-8BEN-E forms from foreign contractors is crucial, 3) There are potential Form 990 Schedule F reporting requirements, and 4) FBAR could be an issue if the foreign entity holds funds on our behalf. One thing I'm still unclear on - if we're paying $135k to this foreign fundraising company, are there any threshold amounts that might trigger additional reporting requirements beyond what's already been mentioned? I know some international reporting forms have specific dollar thresholds, and I want to make sure we're not missing anything at that payment level. Also, has anyone dealt with state-level reporting requirements for these types of international payments? Our state requires additional nonprofit filings, and I'm wondering if they have their own rules about foreign transactions.