Receiving payments for work?

I recently completed some freelance work. The customer should pay me $140 for the work that I did for him. Can anyone guide me as to how I can receive payment from this customer?

Ask them to send a cheque in your name. Is that not the easiest way?

Thanks Uma. I am in H4 visa and hence don't have a social security number and hence don't have a bank account. I asked the customer to send a check in my husband's name. Hopefully it should be ok.

Sonal, are you receiving money from an individual or from a company?

If it is from an individual, there is no problem.

If it is from a company, did they ask you for your husband's social security number? If they did, make sure that getting paid on your husband's social security number does not create any tax complication for your husband.

All taxes are computed based on the income made under a particular social security number. And I believe, there a restriction that H1B visa holders can't get paid by anyone else other than their employers/sponsors.

Sonal,

Bharthi is quite right. My husband is on H1B and I am in H4. Last October, I did some basic book keeping work for a small local US firm in Fort Collins, Colorado. It was for a sum of $320.

I gave my husband's social security number and bank account details for the company to send me a cheque. The company sent me the cheque, we deposited it in the bank and all was fine.

However, in January, the company sent us an IRS document indicating this $320 as miscellaneous income earned. I think the intent is to show this as income for tax purposes and pay taxes accordingly.

My husband called the tax preparer and asked him what to do. The attorney said that there are two options.

1. Show the income and pay taxes, in which case INS might ask why did he get paid by some one other than his main employer or

2. Don't show the income. If IRS finds out, we can give some excuse and pay the tax at that time. (He told that it is such a small amount that IRS wouldn't get that upset)

The tax preparer suggested to go with the 2nd option and that is what we did. So far, no questions from IRS.

For future, we decided no to get paid on my husband's SSN in future. We are trying to figure out some other way. Will see what I find out.

Sonal,

What has been stated by Bharthi and Varshini are true. If you worked for a firm and if they send you the check, they would want it to account it against the individual's SSN.

I would suggest you ask them to do a direct deposit by wire transfer to your bank account (hope fully your name is included in your husband's bank account). But the downside here is most of the banks would ask to come to the counter for wire transfer, which would be an extra work for the customer.

If the company insists on getting your husband's SSN, you might have tax problems, irrespective of whether the money is wired into your account or deposited in the form of a cheque.

As a first step, you want to make sure that the company does not account this payment against your husband's SSN. If you accomplish that, there will be no tax related issues. After that, you can ask the company to wire the money to your account or send a cheque to your home.

I did my freelance work for a small company, not an individual.

I spoke to the company regarding payment and they didn't ask me about my husband's SSN. They are going to send a cheque in my husband's name. I can deposit that cheque in my husband's account.

Thanks all for the tips.

Sonal

Sonal,

Great News. If they didn't ask for your husband's SSN, then tax issue is out of the way.

As far as I know, there are two ways to receive payment into your account.

a. Cheque (the way you have proceeded)

Advantages
1. Doesn't cost money
2. Easy for your customer

Disadvantages
1. Takes time (cheque needs to physically come + clearance time)

b. Wire Transfer

Advantages
1. Very quick 24-48 hours

Disadvantages
1. Costs $10 to $15
2. Customer has to go to the bank to execute it

If you can wait and if the money involved is less, Cheque might be a better option.

Shalini

Another option is to use Paypal. I use it to receive payments for the occasional stuff that I sell on eBay!. Paypal can also be used for receiving money from companies to be deposited directly into your bank account.

Initial setup might require a little patience, but once you are through with that, it is quite easy.

After you have a paypal account setup, your customers can go to paypal website and use their credit card or bank ATM card to make a payment. It is not required for your customers to have a account, they can pay by giving their email id. Paypal will receive that money on your behalf and deposit it into your bank account.

Paypal charges $0.30 plus 2.9% for the transaction.

As the money involved increases, wire transfer or regular check might become better options. For smaller amounts, it might be worth trying out Paypal.