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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28906
Experience:  Taxes, Immigration, Labor Relations
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I am non-resident alien without any physical presence in US.

Customer Question

I am non-resident alien without any physical presence in US. I sell digital product/services. If I register LLC and open account, is my earning from US clients subject to US federal tax? I am from India, and US has tax treaty with India.
If my percentage of my income is withheld at source, how do I get refund and/or exception?
Submitted: 11 months ago.
Category: Tax
Expert:  Lev replied 11 months ago.
Several issues...1.That would be a single member LLC - correct?So - it will be treated as disregarded entity for your income tax purposes.Disregarded - means - ignored - and all income is classified as received by teh owner.Thus you as nonresident alien will be receiving that income for US tax purposes.As a nonresident alien - you are taxed ONLY on income from US sources.2.There are some complicated rules to determine teh source of income.Just for illustration income from services is sourced where services are performed. So if you perform services from outside teh US - that income is not from US sources and is not taxed for nonresident alien.Income from selling inventory (including digital product) is sourced where sold. So sales to US customers will be income from US sources and selling to customers living outside the US would not be taxable.3.So generally as a nonresident alien you are taxed ONLY on income on sources within the US - and would need to file teh US tax return - form 1040NR.However - as you already mentioned - there is a tax treaty in effect between the US and IndiaThe tax treaty allows to use some benefits which override US tax code.Specifically - if you have income from US sources teh treaty allows to exclude that income from US taxation if you do not have a permanent establishment in the US.4.To claim tax treaty benefits - you may use form W8BEN and provide to the payer. That will help to avoid withholding.If the payer for some reason withheld income tax - you still may claim a refund from the IRS, but for that you would need to file your tax return and claim tax treaty benefits on that return.In order to do so - you would need ITIN - personal tax ID.Questions?
Expert:  Lev replied 11 months ago.
To claim tax treaty benefits - you may use form W8BEN and provide to the payer. That will help to avoid withholding.If the payer for some reason withheld income tax - you still may claim a refund from the IRS, but for that you would need to file your tax return and claim tax treaty benefits on that return.In order to do so - you would need ITIN - personal tax ID...I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.