Question: I am a non-resident Amazon FBA seller, and currently, I am exempt from reporting US taxes by submitting the W-8BEN form. Recently, I formed an LLC in Wyoming and am considering changing from operating as an individual seller to operating under my new LLC. However, I am unsure about my tax filing requirements and obligations.
As Amazon is an independent agent, I assume that I am not an ETBUS, but I am unsure about my filing requirements. Apart from forms 5472 and 1120, do I need to file a 1040NR? Furthermore, if I receive a 1099K in the future, will I need to pay any income tax? I have met the $20k/200 transaction criteria set by the IRS.
Answer: As a non-resident Amazon FBA seller, it’s important to understand your tax filing requirements and obligations. In this article, we’ll answer question about operating under a single member LLC and provide guidance on tax reporting for non-resident sellers.
Tax Reporting for Single Member LLCs Owned by Foreign Persons
A single member LLC owned by a foreign person is a disregarded entity for tax purposes. This means that income earned by the LLC is reported directly on the owner’s tax return, and the LLC is not required to file and pay taxes on its own. However, if the LLC has elected to be treated as a corporation, it will be required to pay taxes on all sources of income, whether the income is ECI or not, or whether it received a 1099-K or not.
Tax Filing Requirements for Non-Resident Sellers on Amazon
If you have submitted W8-BEN in the past certifying as a foreign person selling on Amazon, switching to a U.S Single Member LLC wouldn’t have any impact on how you are taxed, as long as the LLC is a default single member LLC that has not elected to be treated as a corporation.
In the context of Amazon selling activities, a foreign person who is not physically present in the United States and merely solicits orders from within the United States only through advertising and then sends tangible goods to the United States in satisfaction of the orders is unlikely to be engaged in a trade or business in the United States, which means that effectively connected income is unlikely to result.
Understanding Form 1099-K and Taxability
If you sold goods or provided services and used a third-party settlement organization, such as Amazon, you may receive a Form 1099-K. However, the form is strictly to notify you that you received these payments, so you can accurately report income if needed when you prepare your taxes.
The amounts included within the form are not necessarily subject to income tax in the US. You should use the information reported in conjunction with your other records and seek advice from competent tax professionals to determine whether it is taxable income and to determine your correct tax.
Filing Requirements for Different Classification of LLCs
Depending on its tax classification and ownership structure, an LLC may need to file different types of federal tax returns and information returns. Here are some of the forms that may be required:
- If the LLC is a foreign-owned single-member LLC, it may need to file a proforma 1120 and Form 5472 with the IRS.
- If the LLC is treated as a partnership for federal tax purposes, it will need to file a final Form 1065 with the IRS.
- If the LLC has elected to be treated as a C corporation for federal tax purposes, it will need to file a final Form 1120 with the IRS.
It’s important to understand your LLC’s tax classification and ownership structure to determine which forms you need to file. Seeking guidance from a competent tax professional can help ensure compliance with tax laws and regulations.
As a non-resident Amazon FBA seller, it’s important to seek guidance from competent tax professionals to ensure compliance with tax laws and regulations. Whether you’re considering switching to a single member LLC or need help with your tax filing requirements and obligations, I’m here to help. As a Certified Public Accountant, I stand ready to assist you with your tax-related concerns. Contact me today to schedule a consultation.