US Tax System for Foreigners: Essential Information

The tax system in the United States can be complex, especially for foreign entrepreneurs. As a company owner in the US, you may encounter various taxes at federal, state, and local levels. LLCs are subject to "pass-through" taxation by default, meaning company income is directly included in owners' personal income tax. Corporations pay corporate tax and shareholders are taxed a second time when they receive dividends (double taxation). An important issue for foreign national company owners is the distinction between US-sourced income and foreign-sourced income. Only your US-sourced income is subject to US tax. You may need to file Form 1040-NR (tax return for foreigners) or Form 1120 or 1065 depending on your company structure. Due to FATCA (Foreign Account Tax Compliance Act), you may also need to report your foreign bank accounts. Tax treaties can prevent double taxation in some cases. Working with a professional CPA is strongly recommended.