How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask CGCPA Your Own Question

CGCPA
CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience:  over 40 years experience in tax matters
50756543
Type Your Tax Question Here...
CGCPA is online now
A new question is answered every 9 seconds

Bank account in America and Taxation Hi, I run a small

Resolved Question:

Bank account in America and Taxation

Hi,

I run a small software company in New Delhi. Currently we get all our payments via Paypal. Anyway, lately RBI (reserve bank of India) has made some very strict rules about the number of transactions, amount, etc because of which we want to open up a bank account in America and then wire transfer the money from it to our Indian bank account?

1) Will we have to pay taxes in America for this income?
2) If we pay taxes in America, will we have to pay again in New Delhi?

Please advice

Thanks!

P.S. To open a bank a/c I've learned we are required to open a LLC and get a TIN # (since individuals outside US cannot open a bank account).
Submitted: 2 years ago.
Category: Tax
Expert:  CGCPA replied 2 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

If you form a US based LLC, that LLC will be able to open a US bank account. It will be obligated to file tax returns in the US and, yes, there will be US tax returns due from the owners of the LLC. The LLC itself will not owe taxes but will only have a reporting requirement. The reporting is required to reflect the totality of the financial activities of the LLC and the distribution of US based profits to the members of the LLC.

You will also need to report and pay taxes on the income in India. However, the tax treaty between the two countries provides for a credit to be claimed on the India returns for the taxes paid to the US so as to avoid/minimize double taxation. Here is a link to the tax treaty between India and the US. Paragraph 25 provides for the relief from double taxation.

http://www.irs.gov/businesses/international/article/0,,id=169600,00.html

To help you better understand the tax reporting here in the US I am also including the following statement from the Internal Revenue Service about LLC taxation. Since you are not US residents/citizens the S Corporation filing will not be permitted and the partnership filing will be needed. The forms and instructions can be viewed on line at the IRS web site which is www.irs.gov The main form is form # XXXXX The TIN application can also be obtained at that web site. The article below also contains links you may find useful. I recommend that you print the article as well as the tax treaty in their entirety for your records.










Limited Liability Company (LLC)






A Limited Liability Company (LLC) is a business structure allowed by state
statute. LLCs are popular because, similar to a corporation, owners have limited
personal liability for the debts and actions of the LLC. Other features of LLCs
are more like a partnership, providing management flexibility and the benefit of
pass-through taxation.

Owners of an LLC are called members. Since most states do not restrict
ownership, members may include individuals, corporations, other LLCs and foreign
entities. There is no maximum number of members. Most states also permit "single
member" LLCs, those having only one owner.


A few types of businesses generally cannot be LLCs, such as banks and
insurance companies. Check your state's requirements and the federal tax
regulations for further information. There are special rules for foreign
LLCs.


Classifications


The federal government does not recognize an LLC as a classification for
federal tax purposes. An LLC business entity must file a corporation,
partnership or sole proprietorship tax return.


An LLC that is not automatically classified as a corporation can file Form
8832 to elect their business entity classification. A business with at least 2
members can choose to be classified as an association taxable as a corporation
or a partnership, and a business entity with a single member can choose to be
classified as either an association taxable as a corporation or disregarded as
an entity separate from its owner, a "disregarded entity." Form 8832 is also
filed to change the LLC's classification.


Effective Date of Election


The election to be taxed as the new entity will be in effect on the date the
LLC enters on line 8 of Form 8832. However, if the LLC does not enter a date,
the election will be in effect as of the form's filing date. The election
cannot take place more than 75 days prior to the date that the LLC files Form
8832 and the LLC cannot make the election effective for a date that is more than
12 months after it files Form 8832. However, if the election is the "initial
classification election," and not a request to change the entity classification,
there is relief available for a late election (more than 75 days before the
filing of the Form 8832).


References/Related Topics


CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience: over 40 years experience in tax matters
CGCPA and 5 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.