Am I a US tax resident?

[migueljuan]

I have European nationality, live in Europe and want to open a disregarded entity LLC as a non-resident. I will have only European customers, so as far as I can see I would not be taxed by the IRS. However, the folks at CircleClub have told me that since I have a social security number (I went to university in the US), that the IRS would automatically treat me as a resident and tax me on my income from the LLC.

It doesn’t make sense to me that even though I don’t live in the US nor have a green card, that simply because I was assigned a SSN 20 years ago that I would be seen as a tax resident.

Does anyone know if this is true? I can’t find any information anywhere that confirms this. Thanks!

 

[Martin Everson]

However, the folks at CircleClub have told me that since I have a social security number (I went to university in the US), that the IRS would automatically treat me as a resident and tax me on my income from the LLC.

In US most peoples TIN is their SSN it seems so having an effective TIN for US could be root of issue. Speak to a US tax advisor or maybe someone knows more. I don't claim to know much about the US other than to avoid it....lol.

Topic no. 857, Individual taxpayer identification number (ITIN) | Internal Revenue Service

Topic No. 857 Individual Taxpayer Identification Number (ITIN)

www.irs.gov

 

[Xshore]

Having a SSN doesn't make you tax resident..

 

[daniels27]

As a non resident alient, you are only subject to US taxes once you pass the substantial presence test:

Substantial Presence Test | Internal Revenue Service

Understand the requirements for meeting the Substantial Presence test for the calendar year to qualify as a United States resident for tax purposes.

www.irs.gov

When fillint out tax forms, you should use the W-8 BEN forms and not use any W-9 form:

Nontaxable Types of Interest Income for Nonresident Aliens | Internal Revenue Service

Nonresident aliens are not taxed on certain kinds of interest income.

www.irs.gov

 

[migueljuan]

Actually I think I need to re-phrase my question. The question here is NOT am I a tax resident, because its clear that I am not. However, according to CircleClub, a foreign-owned LLC is no longer considered "foreign-owned" when a SSN was used to obtain the EIN. This changes how it is taxed. Again, I can't find any information online about this. Has anyone heard this before?

 

[daniels27]

Actually I think I need to re-phrase my question. The question here is NOT am I a tax resident, because its clear that I am not. However, according to CircleClub, a foreign-owned LLC is no longer considered "foreign-owned" when a SSN was used to obtain the EIN. This changes how it is taxed. Again, I can't find any information online about this. Has anyone heard this before?

Please in particular pay attention to Form 5472 (which is only mandatory for foreign-owned LLCs). I highly expect you to get a $25,000 fine if you do not file it.

This is also where you can read the IRS definition of "foreign owned":

Instructions for Form 5472 (01/2024) | Internal Revenue Service

www.irs.gov

A foreign person is:

• An individual who is not a citizen or resident of the United States;
• An individual who is a citizen or resident of a U.S. possession who is not otherwise a citizen or resident of the United States;
• Any partnership, association, company, or corporation that is not created or organized in the United States;
• Any foreign estate or foreign trust described in section 7701(a)(31); or
• Any foreign government (or agency or instrumentality thereof) to the extent that the foreign government is engaged in the conduct of a commercial activity, as defined in section 892.

25% foreign owned.
A corporation is 25% foreign owned if it has at least one direct or indirect 25% foreign shareholder at any time during the tax year.

In short, you will need to file the form or face the fine.

And just for the record, foreign-owned and tax residency are two separate things. But as mentioned above, you are not liable to any taxation of your LLC. Having a SSN does not change that.