AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Keep a signed contract, the contractor's Form W-8BEN, every invoice, proof of each payment with the exchange rate used and its source, evidence of the work delivered, and any Nigerian withholding tax receipts. The IRS generally expects records for three years, four for employment tax, and longer in some cases; Nigeria can raise additional assessments within six years, so six years is the safer minimum for anything with a Nigerian side.
Why both tax systems care
When a US business pays a contractor in Lagos, two tax authorities may later ask about the same payment. The IRS wants to see that a deduction was a real business expense, that the payee was a contractor rather than an employee, and that any withholding or reporting duty was met. The Nigerian side, through your subsidiary if you have one or through the contractor's own tax affairs, may ask whether withholding tax applied and whether the invoice supports the amount. One well-kept file answers both.
The file for each contractor
| Record | Why you need it |
|---|---|
| Signed contract or statement of work | Shows the relationship, scope, rate and that work is done in Nigeria |
| Form W-8BEN (individuals) or W-8BEN-E (entities) | Establishes foreign status; IRS Pub 515 says a valid W-8 exempts the payee from backup withholding and 1099 reporting |
| Each invoice | Supports the amount and the expense |
| Proof of payment | Bank or provider confirmation with date, amount and currency |
| Exchange rate and source | The IRS requires dollar amounts at the rate prevailing on the day and has no official rate |
| Evidence of delivery | Files, reports, timesheets or acceptance emails showing the work happened |
| Withholding tax receipts, if deducted | Proves remittance and gives the contractor its credit |
| Notes on classification | Why the person is a contractor, not an employee |
What a good invoice shows
Ask contractors for invoices that show their full name or business name, address, the date, an invoice number, a description of the work, the period covered, the amount and currency, and their bank details. Where a Nigerian contractor is registered for VAT, the Nigeria Tax Act 2025, as summarised by Mondaq in May 2026, requires a VAT invoice to show the supplier's TIN and registration number, invoice number, name and address, date of supply, purchaser's name, gross amount, and VAT charged and rate. See invoice checks for Nigerian vendors.
Payment proof and the exchange rate
For each payment, keep the confirmation that shows what left your account in dollars and what arrived in naira, if you paid in naira. The IRS says to translate foreign currency amounts at the rate prevailing when the item was paid, lists banks, US Embassies, the Treasury and the Federal Reserve among rate sources, and states there is no official IRS rate. Record which source you used and keep a screenshot or statement line showing it. If your provider showed you the rate before you approved, keep that confirmation; it is the best evidence of the rate you actually got.
How long to keep it
| Rule | Period | Source |
|---|---|---|
| IRS general rule | 3 years from filing | IRS, reviewed Jun 2026 |
| IRS, income under-reported by more than 25% | 6 years | IRS |
| IRS, worthless securities or bad debts | 7 years | IRS |
| IRS, employment tax records | At least 4 years | IRS |
| IRS, no return filed or fraudulent return | Indefinitely | IRS |
| Nigeria, additional assessments | Generally within 6 years (no limit for fraud or wilful default) | PwC, reviewed May 2026 |
Because the Nigerian window is longer than the US default, and because both systems remove the time limit for fraud, many businesses keep contractor files for at least six years after the last payment. Keep them longer if a dispute or audit is open, and do not destroy a file while the contractor is still working for you.
Classification evidence
The IRS looks at the whole relationship when deciding whether someone is an employee or a contractor, grouping the evidence under behavioural control, financial control and the type of relationship, with no single factor deciding. Either side can ask the IRS for a ruling on Form SS-8, which the IRS says may take at least six months. Keep evidence that the contractor controls how the work is done, uses their own equipment, can work for others and invoices for results. A Nigerian worker who works your hours, uses your laptop and reports to your manager looks like an employee wherever they sit. See employee or contractor.
Keep the files where someone other than the person who paid the contractor can find them. A shared folder with a fixed naming pattern, such as contractor name, year and month, makes a request from an auditor or the IRS a matter of minutes rather than days.
Steps
- Open one folder per contractor before the first payment.
- Collect the W-8BEN and contract before paying anything.
- Save each invoice, payment confirmation and rate source the day you pay.
- Add delivery evidence monthly.
- Review each file once a year and keep it at least six years after the last payment.
Where Pryme fits
Through Pryme's partnership with VerifyDoc.ai, a customer can generate a verifiable receipt or statement for a payment, which anyone can check is genuine and unaltered. That makes a strong addition to the contractor file. See verifiable receipts and invoicing.
Questions people ask
What records do I need when paying a contractor in Nigeria?
A signed contract, Form W-8BEN, each invoice, proof of payment with the exchange rate and its source, evidence of the work, and any withholding tax receipts.
How long should I keep records for foreign contractors?
The IRS default is three years, longer in some cases; Nigeria can assess within six years. Keeping files for six years after the last payment covers both in most cases.
What exchange rate do I use for a naira payment on my US books?
The rate prevailing on the day of payment. The IRS has no official rate; record the source you used.
Do I need a W-8BEN from a Nigerian freelancer?
It is the standard way to document foreign status. IRS Publication 515 says a valid W-8 exempts the payee from backup withholding and 1099 reporting.
Sources
- IRS: How long should I keep records? (reviewed 30 Jun 2026) · accessed Oct 2026
- IRS: Foreign currency and currency exchange rates (reviewed 22 May 2026) · accessed Oct 2026
- IRS: Independent contractor (self-employed) or employee? (reviewed 19 May 2026) · accessed Oct 2026
- IRS: Publication 515, Withholding of tax on nonresident aliens and foreign entities (2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, corporate tax administration (reviewed 29 May 2026) · accessed Oct 2026
- Mondaq: Examination of the VAT provisions under the Nigeria Tax Act 2025 (28 May 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.