US Tax Laws and the Non-Resident Expats
Recent expatriated individuals and non-citizens can still be subject to the United States government. Becoming a non-US person does not mean you are entirely out of reach of the US tax returns. The following are the possible ways you might get the government’s attention and put you under scrutiny for tax-related issues:
United States LLC
Before, non-US citizens assembled LLCs since there were no tax filing requirements for an LLC. An LLC or a limited liability company provides a range of flexibilities to business owners. They can opt to use corporate tax guidelines instead of following the rules for partnership, or they can also be considered as a non-profit organization. One condition for an LLC to be tax exempt is a person who is a foreigner should own it.
Starting in 2017 there are new tax requirements for LLC, including tax reports. The government might not require the LLC to pay taxes, but information forms are required. Companies can receive penalties when these forms are not filed.
Passive and Active Income from the US
Many different factors are affecting each person in terms of tax laws. Also, there are differences in requirements between the federal and the state. Having passive or active sourced income can become a very complicated area.
Brokers are usually responsible for withholding taxes on passive income such as dividends, investments, etc. If the broker does not have the correct information, the amount of tax withheld may be incorrect also. The result will be you owe the government more tax, or you would ask for a refund for overpayment. Both situations would require the submission of a United States tax return to fix the problem.
Selling a real estate means withholding 15% of the amount sold. There is a possibility of recovering some of this through Form 1040NR. The process requires the help of a tax professional because it is made up of complicated procedures. The method also involves a lot of time.
Owning a “situs property” in your estate, even at the time of your death, and also as a non-citizen can entail tax status. A situs property is a property in the United States or those connected to the United States. It is important to note that property does not only refer to tangible property but also stocks, like a stock owned by an American company. The stock can be stored inside the country or even outside. If you have an American stock held in a Swiss bank, IRS can still make you liable for the tax requirements of that stock.
When a state holds $60,000 in situs property at the time of death of the owner, the estate tax can also be required. Treaties that exist between countries can provide a little relief.