Confused by Taxes?

Simplified Taxes Explained:

Having a “US Source Income” makes you liable for filing taxes in the United States. Filing doesn’t necessarily mean that you need to pay taxes, it only means you are required to “file” your tax return. What is considered a US source income? Having a bank account in the US that makes transactions can be one indicator that you have a US source of income that requires a tax filing.

Your tax filing will depend on whether your entity is an LLC or a C-Corp. Also having multiple members in your company will also determine how you file your taxes. We don’t want to confuse you with complicated forms, so to simplify:

As a non-resident, you have two options:

A: Only filing a 5472 with a 1120 pro-forma to just inform the IRS that you’re not based in the US. You list your contributions and distributions, you put X amount $, and you took out X amount of $. You file and inform them. That would be it!

B: Defining your income from your business and defining your net profit after your expenses and filing a 1040nr and paying a percentage of your profit.

Which one should I choose?

Both A and B work. A is an option if your company has no interest to do any future/further long business in the US. B is if you’re considering applying for an investor visa, you may potentially be relocating more operations to the US, etc. So, depending on your future plans, you can choose accordingly.

C-Corp or a Multi-member LLC? If it’s a Multimember, first the business must file its taxes. To do this you have until March 15th to generate form named K1, which is for the purpose of defining the individual income of the members, and then each members files individually. If it’s a C-Corp, first your company needs to file and pay its own income and after that, depending on the income distribution to member/members, you’ll have to also file individually.

What is the percentage? Numbers vary depending on a lot of factors. Having employees, having kids, being married, etc., are all things that can impact your tax percentage. However, most of our clients who make 5-figure profit pay around 18-25%.