U.S. Source FDAP Income & Withholding Taxes

When certain forms of U.S. income are paid to a non-U.S. taxpayer, the income is generally subject to a withholding tax at source.

This ensures that the federal government gets its share of U.S. income taxes owed on any U.S. income paid to non-U.S. taxpayers because non-U.S. taxpayers generally do not need to file a federal tax return each year.

U.S. source FDAP income is generally passive income paid to a nonresident. Sections 1441 and 1442 of the Internal Revenue Code prescribe a 30% withholding tax rate unless the rate can be reduced by a tax treaty.

For a larger database of tutorials, please visit our website and search for your question:

DISCLAIMER: The information provided in this video may contain information about tax, financial, and legal topics. Such materials are for informational purposes only and may not reflect the most current developments. These informational materials are not intended and should not be taken as tax, financial, or legal advice. You should contact an advisor to discuss your specific facts and circumstances. Self-help services may not be permitted in all states or jurisdictions. The use of these materials does not create an attorney-client or confidential relationship. This video does not include information about every topic or issue related to these informational materials.

#IRS #Taxes #FDAP

[gabrieljenik]

Great Video! Thanks. Going through the example you have given. If Sam would have opened a regular LLC, he would have not been withholded taxes, right?

[randylabotte]

Let's say Sam has a portfolio of US based company stocks that pay dividends. Assuming the brokerge withholds the taxes (30%) Sam would not file anything with the IRS. Am I understanding your presentation correctly?

Also, what if Sam is married to a US Citizen and he and his wife choose to treat him as a resident for tax purpose and file a joint income tax return (pub 519). How would Sam's FBAR interest/dividends of 30% via 1042 foriegn investor be reduced to reflect his joint return status with his US citizen wife?

[rifatrashidadnan]

Super confused about US LLC formation as NON US Resident

My question is what's the benefit of forming a llc for non US residents for Amazon. I am from Bangladesh which has a tax treaty. When I put my own country's tax id the default tax withholding becomes 10% for royalties earned from amazon us market. My question is, if I even form a single member US LLC then after getting EIN or even ITIN, will amazon make the default tax withholding 0%? I guess no. It will be 10% as I reside in Bangladesh though my LLC will have US Address and phone number. Please correct me if I am wrong here.
In this case, what's the benefit I get if I form a US llc? Just share your ideas please.