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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29571
Experience:  Taxes, Immigration, Labor Relations
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I have a sole proprietorship company in mexico, We draw

Customer Question

I have a sole proprietorship company in mexico, We draw plans for architectural firms in arizona. Now I'm a resident and working in USA under tn visa (completely separated from my company in Mexico), I just started operating again in mexico I'm not working directly, I subcontract labor in mexico. US companies are going to pay my Mexican company with wire transfers to mexico bank accounts. do I need to report that income? I will be paying tax in Mexico.
if I do, How do I report it on my personal income tax in USA, If I don't need to pay I want to know the law to protect/ be prepared to demonstrate that I don't need to pay taxes in USA.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

If you are working in the US - but you are not an US citizen - you are treated as a resident alien for income tax purposes.
That means - you should report all your worldwide income on your US tax return.
So if you run a business as a solo proprietor - there would not be any difference for income tax purposes, but the owner will be taxed on net business profit - and will be subject to both - income and self-employment tax.

You will report your income and may deduct qualified expenses.- you may report all business income and expenses -

on the schedule C -

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

The net income (after deductions) will be reported on the form 1040 line 12 -

http://www.irs.gov/pub/irs-pdf/f1040.pdf

If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax

http://www.irs.gov/pub/irs-pdf/f1040se.pdf

and net self-employment income is subject to 15.3% self-employment tax.

Self-employment taxes from schedule SE will go to the form 1040 line 57 -

http://www.irs.gov/pub/irs-pdf/f1040.pdf

Also - you will deduct half of self-employment taxes on the line 27.

Generally - that all you needs tax purposes.Please review all possible deductions - that might help to reduce income tax liability.
.

Now - if the same income is taxed in the US and in Mexico - you will claim a foreign tax credit on your US tax return where you are a resident - and effectively will avoid double taxation of the same income.

Any questions?

Expert:  Lev replied 1 year ago.

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If you still have any doubts, need clarification - please be sure to ask.
I am here to help you will all tax related issues.