XTRM helps takes away the burden of tracking and dealing with global tax reporting.
How does XTRM manage taxes?
In order to understand how XTRM manages taxes, it is important to understand how XTRM is classified in the payments industry.
1) XTRM is what is referred to as Third Party Settlement Organization (TPSO).
We sit between the remitter (paying company) and beneficiary (receiving person or company). A third party settlement organization is the central organization that has the contractual obligation to make payments to participating payees in a third party payment network.
Characteristics of a third party payment settlement organization include:
- The existence of a central organization with whom a substantial number of providers of goods and services (who are unrelated to the central organization) have established accounts
- an agreement between the central organization and the providers to settle transactions between the providers and purchasers
- the establishment of standards and mechanisms for settling such transactions, and
- the guarantee of payment in settlement of such transactions.
2) Payments made to companies or individuals are made from XTRM.
All payments made to beneficiaries are identified as having come from XTRM, even if the orginal source of the funds was a 3rd party remitter (paying company).
3) Taxation at source is not required.
The recipients of payments will typically not be employed directly by your company, but even if they are the responsibility to notify the IRS (or whichever Tax authority based on where they live) falls on the recipient. This is the case all over the world wherever we process payments. In other words, when the recipient or company submits their taxes, they have to declare 'Other income' and withholding at source is not required. Recipients can use the data on the 1099-K (USA) or equivalent transaction reports posted in their account, regardless of where they live in the world to notify their tax organization of all applicable payments.
4) Beneficiaries of payments are responsible for reporting all transactions.
It is the responsibility of the beneficiary of all payments, regardless of whether they are an individual or a company, to report any and all income to their local tax authority in the usual manner. It requires them to submit data and documents we provide them on the site to their local authority. For example, in the US, individuals and companies can login to their account at anytime and download from their account the 1099-K and applicable payments for any tax year.
5) Remitters (paying companies) reporting is provided in the system.
We provide the necessary reporting for any remitting company to provide to the IRS. The requirement to report depends on the country and local rules. We will take the burden or submitting those reports for certain countries based on local rules and payment threshold limits.
6) We collect all required data for the purpose of tax reporting.
To assist all companies and recipients with correctly filing their taxes for all payments sent and received, we capture all the relevant data electronically. For example, this includes electronic collection of W9 and W8-BEN or country equivalent data as well as electronic posting of 1099 K's (USA) and all transactions reports for download.