Introduction

The US Business Tax Filing process can be a pain, especially for Non-Residents as it's not their homeland and has a different tax system. But don't worry! These are broken up into bite-size pieces in this guide to help you walk through filing your taxes with confidence/info.

Understanding US Business Taxes with Basic Information

All businesses in the US have to pay federal income tax on what they earn. It varies as per the category of business entity and annual income.

Businesses are also obligated to pay state taxes along with federal ones. These vary from state to state and may include income taxes, franchise fees, or sales tax.

US Business Entities

The first thing you must know before filing a tax is your kind of business entity. Your category also concludes how taxes are filed so understand this clearly and directly according to all steps above or ask an expert.

Sole proprietorship: The simplest type of business, it is owned and operated by one individual. The owner includes income and expenses on their individual tax return.

This occurs when two or more persons own the business. Both partners report their pro-rata share of income and expenses on each tax return

A corporation is a separate legal entity, which means the business itself pays taxes on its income (and shareholders pay tax on dividends).

An LLC is more flexible in terms of taxation in that the owner can then opt to have it treated as a sole proprietorship, partnership, or corporation.

Important Tax Forms for US Businesses

This is important as you have to fill out proper tax forms in order to remain in the good books of the IRS. Some of the important forms are listed below.

This is the major form for corporations to report their income, gains, losses, deductions, and credit.

This is the form that partnerships will have to use in order to disclose income, deductions, gains, and losses. It is worth noting that the partnership does not pay income tax, but partners do.

This form is used by non-resident individuals to report income that is effectively connected with a US trade or business and which may be taxed in the USA. This is particularly important for non-resident owners of US businesses.

Deadline to File — Extension Available

Similar to any other critical due date absence of missing can incur penalties, and unfiled tax filing deadlines too. Know When Your Forms Are Due

Corporations generally must file a tax return by the 15th day of the fourth month after their year-end.

The deadline which is generally the 15th day of the third month after your client's tax year ends if it involves partnerships.

If you need more time to file, use Form 7004. Note, however: An extension to file is not an extension to pay any taxes due.

State vs. Federal Taxes

You might spend more emotional energy worrying about federal taxes, but don't ignore your state tax bill. These can vary greatly depending on the location of your business.

There is no federal income tax, but each state has its own laws regarding whether you need to pay (or not) either an income tax or a sales/franchise tax. Places like Texas and Florida do not have a state income tax so this could make your taxes easier as well.

Check with your tax authority in that state to understand what you need to do for taxes, and which forms precisely you should have on file.

Non-Resident Owner Category

One may run into a few additional tax issues as a non-resident owner of a US company. You could be faced with extra reporting responsibility as well because of tax liabilities.

However, as a non-resident owner, your company is not actually required to withhold any income for US tax purposes. These returns can include dividends, interest, and other types of income.

Even if you do not live in the US, and are considered a non-resident alien for tax purposes you will still have to file information on any income received from within the United States (on Form 1040-NR). The IRS uses this document to assess the appropriate tax due on earned income in the US.

Tax Treaties and Their Impact

US Tax Treaty: US tax treaties with countries can decide how the non-resident will be taxed Meaning income earned in the USA. This is what international treaties were created for — to avoid double taxation and guarantee equal conditions.

If your home country has a tax treaty with the US, you may be able to get preferred rates or even exemptions (no taxes) on some types of income. This can make a big difference in your tax liability.

In order to qualify for a tax treaty you will need requires filing Form 8833 with your tax return. This form gives information about the treaty benefits you claim to be qualified for.

Common Mistakes to Avoid

For all you non-resident owners out there, here are some of the top mistakes to avoid when filing US business taxes so that you can stay on track and keep your company in good standing.

Failure to file taxes on time: This is perhaps one of the most common errors. That can mean penalties and interest charges.

Failure to include necessary information, as well as filing out the improper tax forms can also contribute to delays and potential fines.