Nonresident tax return

A nonresident alien is subject to income tax on two categories of income: 1. US source income not connected to a trade or business (such as dividends, interest, and royalties) and 2. Effectively connected income with the conduct of a trade or business in the US.

In most cases, US source income gets taxed at source. The person or entity in charge of issuing the payment of the income would withhold the correct tax (generally a fixed rate of 30% for all US source income). However several countries have a tax treaty with the US which provides for a lower tax rate (or even no tax) on specific types of income (ex. dividends, interest).

You should check if your country of residence and the US have a tax treaty in place that provides for a lower tax for your specific type of income. If your income was taxed at a higher rate that the tax treaty rate, you are allowed to claim the excess tax withheld as a refund by filling a nonresident return.

Effectively Connected Income (ECI) with the conduct of a trade of business in the US

ECI basically means income from a business located in the US. If the business is registered in the US, but there is not business operations in the US, then the income from this business is not considered effectively connected. This is usually the case with a foreign-owned LLC.

If you register a LLC as a foreign owner, but don’t conduct business operations in the US (such as having a physical location or a person/agent working for the business in the US), then your income is not considered effectively connected and is not subject to US income tax.

You should file an income tax return to report the LLC income as it was likely reported by third parties (such as Stripe, PayPal, Amazon, or Shopify) to the IRS. The owner of a single-member LLC must report the LLC income in his/her personal return (Form 1040-NR if a nonresident alien). If the income is not ECI, we must attach a statement to the return explaining to the IRS why your LLC income is not taxable in the US under the law. Filling a nonresident return will prevent the IRS from making a tax assessment for the revenue reported under the LLC.

Our package

Form 1040-NR

Starts at

$300

Prices

Generally, if you need to report US source income from a Form 1099 or 1042-S, our fees start at $300 and depends on the number of forms you have for the year.

A return reporting LLC income that is not effectively connected with a US trade or business requires that we attach a statement to the return explaining to the IRS why this income is not taxable in the US under the law. We normally charge $500 or more for this return. We’ll need to review your situation in detail to assess our fees.

Process

Click on “Get started” above to learn about our seamless step-by-step process to prepare your tax return.