Technical Wednesday.
Hello, I’m Cr. Maximiliano Mira Salas, and today I want to share the continuation of our exploration of IRS Publication 519, an essential guide to understanding how foreigners are taxed in the United States. If you’re a foreigner with income in the U.S., this topic is crucial for you.
Residence Criteria and Tax Obligations
To determine whether you must pay taxes as a resident or non-resident, the IRS uses tests such as the substantial presence test.
• Residents: Report worldwide income.
• Non-Residents: Only taxed on income generated within the U.S.
Key Forms for Foreigners
Complying with tax obligations requires identifying and filing the appropriate forms:
• 1040NR: Tax return for non-resident aliens.
• W-8BEN: Certifies non-resident status and reduces withholding taxes through international treaties.
• 5472: Mandatory for single-member LLCs owned by foreigners.
• 8854: Required for those ending their tax residency in the U.S.
Rental Income: Tax Elections You Can Make
If you own property in the U.S., you can choose:
- 30% tax on gross rental income (IRC §871(a)): No deductions allowed.
- ECI Election (Effectively Connected Income): Allows deductions of expenses and taxes on net income, similar to a resident.
👉 This election can significantly affect your tax burden but must be made correctly to avoid penalties.
Key Dates for Tax Season
Don’t let deadlines catch you off guard:
• January 31: Contractor payment reports (1099-NEC).
• March 15: Partnership and S Corporation returns (1065 and 1120S).
• April 15: Individual and C Corporation returns (1040 and 1120).
💡 Remember: You can request an extension until October 15, but any balance due must be paid by April 15 to avoid penalties.
Real Cases: How to Avoid Penalties
• Form W-8BEN: If you export services to the U.S. and don’t file this form, 30% of your income may be withheld.
• Form 5472: Failure to timely file for your LLC can result in a $25,000 penalty.
📌 Don’t worry, at FINANCERS we’re here to help!
We handle your tax filings, optimize your tax burden, and help you comply with the IRS stress-free.
👉 If this applies to you or you know someone who needs it, share this with your friends!
Contact us today and work peacefully
