If you’re a non-U.S. resident who owns a U.S. LLC (often a Wyoming/Delaware/New Mexico LLC), it’s normal to feel uneasy—especially when you receive tax forms like a 1099, use a U.S. fintech bank (Mercury, Wise, PayPal, Stripe, ClickBank, etc.), or transfer money abroad. This FAQ is written for foreign owners with little or no U.S. tax background and focuses on the most common real-world situation:
- Foreign individual (nonresident) owns a U.S. single-member LLC (default = disregarded entity for U.S. federal tax).
- Work is performed outside the U.S.
- Clients/customers may be in the U.S. or abroad
- Payments run through U.S. platforms and/or a U.S. bank account
- Owner wants to know: “Do I owe U.S. tax? What filings are required? What changed recently?”
Important: This is educational guidance, not legal advice. The correct answer depends on facts (where work is performed, U.S. presence, dependent agents, inventory/warehouses, state nexus, and the type/source of income).
1) Do I pay U.S. Social Security / Medicare (Self-Employment Tax) as a nonresident?
Usually no—if you are a nonresident alien and your business activity is not effectively connected to a U.S. trade or business (USTB), you generally are not in the U.S. payroll/self-employment tax system.
- Where this can change:
- You physically perform services in the U.S.
- You become a U.S. tax resident under U.S. residency rules
- Your income becomes effectively connected income (ECI) with a U.S. trade or business (more below)
2) If the IRS reviews my business, what are the chances they say I owe U.S. income tax?
The IRS doesn’t tax you just because:
- your LLC is formed in the U.S.,
- your bank account is in the U.S.,
- your customers are in the U.S.,
- you received a 1099.
The real question is whether your activity rises to a U.S. trade or business, producing ECI. If the IRS disagrees with your position, it becomes a facts + law discussion (and sometimes a dispute). IRS.gov’s nonresident alien guidance explains the two main buckets: ECI (taxed at graduated rates after deductions) versus FDAP (often 30% gross withholding, unless reduced by treaty).
3) If I were taxable in the U.S., would I be taxed on revenue or profit?
If you are taxed on ECI, the general concept is net taxation: tax applies to profit (income minus allowable deductions), using graduated rates.
- But here’s the trap for nonresidents:
- “No return = no deductions” risk
U.S. law can deny deductions/credits unless a proper return is filed. For nonresident individuals, IRC § 874 ties access to deductions/credits to filing a “true and accurate return.”
4) What is a “protective return,” and when should a foreign owner consider it?
A protective return is a filing strategy used when you believe you do not owe U.S. income tax, but you want to:
- put the IRS on notice of your position, and/or
- preserve the ability to claim deductions if the IRS later asserts ECI, and/or
- reduce penalty exposure and uncertainty.
This is most common when:
- you receive U.S. information forms (1099s) that may trigger IRS matching,
- you have borderline facts (travel to the U.S., agents, warehouses, U.S. contract execution),
- you simply want “sleep-at-night” compliance.
5) If my LLC is dissolved, can the IRS still assess tax later?
Yes. Dissolving/canceling an LLC under state law does not erase potential federal tax exposure from prior years. If tax is owed for a prior year, the IRS can pursue assessments based on statutes of limitation and the facts of that year.
6) I received a 1099 (or a platform says they will issue one). Does that mean I owe U.S. tax?
No. A 1099 is an information form, not a final tax conclusion.
- A 1099 can cause the IRS (or a state) to ask: “We see U.S.-reported payments—why didn’t you file anything?”
That’s when your analysis matters: where you performed services, whether you have U.S. business presence, and whether the income is ECI or FDAP.
7) Do I have to issue 1099s to contractors (e.g., overseas freelancers)?
It depends—but many automated bank “1099 reminders” are generic.
- 1099 filing is generally about U.S. information reporting on certain payments.
- Whether you must issue 1099s depends on the payee’s status, the type of payment, and the rules applicable to your situation.
- If you’re paying non-U.S. persons, different documentation may apply (often W-8 and combination of 1042 series), and the analysis can shift to withholding/information reporting rules.
8) How do I calculate “taxable profit” for a nonresident if I ever become taxable?
If you’re treated as earning ECI, the starting point is business profit:
- Gross receipts – ordinary and necessary business expenses = net profit, then apply the relevant tax rules.
9) “Nothing changed in my business.” Are there any new compliance items besides the usual tax forms?
- Pro forma Form 1120 + Form 5472 (foreign-owned single-member LLC)
- Corporate Transparency Act (BOI reporting) — major 2025 change
10) Do I need to report foreign bank accounts (FBAR) if my LLC is foreign-owned?
Maybe—if the LLC has foreign accounts. The FBAR rules apply to a “U.S. person,” and that definition includes entities such as an LLC. If the LLC has financial interest/signature authority over foreign accounts and the aggregate value exceeds $10,000 at any time during the year, an FBAR filing can be required.
11) Can I transfer money from my U.S. LLC to my home country freely?
In general, yes—wire/ACH/PayPal/other transfers are normal. The tax question is not “can you transfer,” but what the transfer represents in your accounting:
- business expense,
- contractor payment,
- owner distribution/draw,
- reimbursement, etc.
12) Do I really need bookkeeping if I’m “not taxable” in the U.S.?
It may not be legally “mandatory” in the way a specific form is, but it is strongly recommended because it supports:
- your Form 5472 reporting
- substantiation of expenses (if ever needed)
- clear separation of business spending vs owner distributions
- audit defense and financial clarity
Next Step: Get a professional review of your exact facts
If you want a CPA/tax attorney to confirm whether your foreign-owned LLC looks like no U.S. tax / no ECI, identify state exposure, confirm whether you should file protective returns, and ensure you’re correctly handling 5472/1120 and any BOI/FBAR items: Book a paid appointment:
https://oandgaccounting.com/appointment-booking-form/
