Have a Tax Question? Ask a Tax Expert
This is correct, you would be filing a non-resident income tax return to the U.S. for revenues derived from the U.S. market place.
These returns are easy to fill out by most individuals. The problem is you need to make payments.
You return will likely include a schedule C or C-EZ AND which are documents to show net profits from operating the busines in the united states. Non-resient aliens do not have to pay the self employment tax. You will use form 1040-NR.
You would want a professional tax preparer or CPA to file taxes for you the first year so that you can see how it is done. After that you could do it for your self easily enough. You can find a tax preparer in the U.S. to prepare them for you for about 100 to 250 dollars. You could Use H&R block, GHRCI, Jackson Hewitt, etc. OR, skip them all together and use the Turbo Tax Software. The cost of the software is tax deductable. AND Turbo Tax has a inteview process built in to easily guide you through. The problem with using the software is they will automatically prepare an SE tax form for you, which you do not have to pay. (SE tax is Self employment tax)
So you would have to delete the SE form and and zero that line in the form 1040NR and submit your return manually.
If you use Turbo Tax, you will also have to load the 1040NR form before you begin the return.
Here: have a look at the forms:
thank you for accepting my answer, and your feedback.
yes, if you earn less than the personal exemption and standard deduction, you do not have to file a return. That changes each year and is dependent on your filing status.
Filing status is: Single, Married Seperate returns, and married filing a joint return.
In your case you would not be filing a joint return.
The personal exemption for 2008 is 3500
The standard deduction is: 5450 for singles or married fileing seperatte returns.
So you would be able to earn 8950 u.s. before filing a return (as a non-resident alien earning money in the u.s., and not physically present there)
You can set up relationships in the U.S. where withholding of your payments is made from the earnings, but that withholding would be at 30 percent, and you would have to file a return anyway, in order to get back the excess taxes or taxes that you would not have had to pay based on the gross earnings.
this is not possible with retail sales. This is only possible if you are retained as a consultant or independent contractor. Day to day consumers are not going to be able to do this.
Your Follow on Question: May I please clarify... that if I complete and submit a W-8BEN "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding" instead of a W-8ECI then 30% tax will be withheld and given to the IRS with me receiving the balance (remainder)?
ANSWER: Yes, but, you only have withholding if you are dealing business to business, or with agents. Individuals form comsumer sales will not be albe to withhold. The general public is ignorant of this kind of thing, and are not really required to do that, because they are making purchases. So you may still be on the hook for reporting your own income and paying the tax at the end of the year.
for example: if you are retained by a company to provide consulting services, the company would withhold back up taxes of 30% and they, the company would pay the tax to the federal government. However if a consumer buys a service or prodcut from you, they are not required to issue any tax payment or collect or withhold any tax, and so would not even know how to do that.
Your follow on question: about the portion of 100K or more. Normally this would be taxed, as personal income at more than 30%. However, this is business income not peronal services income, and no matter, you would receive the tax treaty rate of 30%. The tax treaty takes precedence.
I understand what you are trying to do. the tax returns are not that hard to do. Your accountant would probably be able to understand them. Even if he was not, you would only need a U.S. tax preparer to do this one time and after that you or your accountant would be able to do it on your own.
the problem you have is that there is no mechanism for consumers in general to withold taxes.
One big reason is, that you pay taxes not on gross revenues, but on net profts. The consumer has no way of determining that.
Setting up any kind of system to enable such transactionsn would be extremely costly. Consider, if you have 1000 customers, then you would have 1000 people making income tax payments in your name. You would have to have a system to produce the tax documents required for the customers to complete and fill in with specific instructions for turning the money in your name over to the IRS. What consumers would do that? who would want to buy from you? Consumers want to point and click. How would you determine the net profit from a single sale, when you have no exact idea of what your variable expenses would be for the business?
Trust me friend, the best way is to have your accountant figure your net profits using the schedule C and then for you to pay tax on that. If your net profits are less than the amounts that I mentioned earlier (8,950 ) you would not even have to file a return.
You can pay a bonus. There should be a bonus button somewhere.
thank you for your remarks.
Fill out the W8-BEN so they only take out the 30%. This is because you are not solely claiming treaty benefits. The treaty will still exempt you from filing if you earn less than the amount I indicated.
You can set it up so that the person who is giving you your paycheck is withholding for you.
You have to make sure they understand that you are subject to backup withholding at 30%.
I checked and they will issue a 1099 form, which is a tax document reporting income to the IRS, for any earnings more than 600 dollars, u.s.
Since there is information sharing between australia and the U.s. you will have to file a return if you earn more than the amount I mentioned before.
The company would in this instance be able to withhold taxes for you. BUT, it could end up being too much, based on your actuall net profit, and you may have to file a return to get a refund.