Hello and thank you for your question.
Since as described below a US citizen or resident must pay
self-employment tax in these circumstances, the answer turns entirely
on whether or not you are a U.S. resident for the year in question:
"Nonresident aliens are not subject to self-employment tax. Resident
aliens must pay self-employment tax under the same rules that apply to
U.S. citizens. However, a resident alien employed by an international
organization, a foreign government, or a wholly-owned instrumentality
of a foreign government is not subject to the self-employment tax on
income earned in the United States."
International Taxpayer - Social Security, Medicare and
Self-Employment Tax
http://www.irs.gov/businesses/small/international/article/0,,id=97228,00.html
The test of whether or not you are a resident for tax purposes is as
follows:
"Residents of the US are generally subject to the same employment
taxes as citizens. While the IRS and BCIS agree that "green card"
holders are residents, the IRS considers foreign workers temporarily
employed in the US as residents for tax purposes too. This is based on
the IRS "substantial presence" test, where tax residence for any tax
year is generally established if an individual is physically present
in the US for the aggregate of 183 days or more over a three year
period using a formula that gives more weight to the more recent
years."
"Substantial Presence Test
Tax resident under the substantial presence test if the time spent in
the US is :
(1/1 x days in current tax year) + (1/3 x days in last tax year) +
(1/6 days in previous tax year) > 182; and
At least 10 days in current tax year."
Furthermore, the US has tax treaties with many nations that provide
for partial or complete exemption from withholding and/or US income
tax on many forms of income. The terms of these treaties vary and
interested individuals should consult a tax professional.
Tax Issues for Foreign Nationals
http://www.schulzlaw.com/mschulz_taxmemo.php
So if you are non-resident, you are exempt.
Otherwise, here is the authority that exposes US resident sole owners
of an LLC to self-employment tax on their LLC income:
"A limited liability company (LLC) is an entity formed under state law
by filing articles of organization as an LLC. Unlike a partnership,
none of the members of an LLC are personally liable for its debts. An
LLC may be classified for Federal income tax purposes as a sole
proprietorship (referred to as an entity to be disregarded as separate
from its owner), partnership or a corporation. If the LLC has only one
owner, it will automatically be considered to be a sole proprietorship
(referred to as an entity to be disregarded as separate from its
owner), unless an election is made to be treated as a corporation."
Frequently Asked Questions
http://www.irs.gov/faqs/page/0,,id%3D15876,00.html
Assuming you are a US resident and have not made an election to have
your LLC treated as a corporation, you are a sole proprietorship, and
it is a disregarded entity for tax purposes.
So the answer to your question for a US resident is the same as if you
had not formed the LLC at all, that is, as if you simply hired this
person directly and had your customers pay you for the services that
he provided to them on your behalf.
"Self-employment tax (SE tax)... applies to those who are
sole-proprietors with net earnings of $400 or more. It also applies to
individuals who have net earnings of $400 or more from the business
entity of a partnership or limited liability company that is
structured as a partnership."
Self-Employment Tax
http://www.irs.gov/businesses/small/article/0,,id=99916,00.html
Search terms used:
self-employment "sole proprietor " site:irs.gov
h1b visa "self employment tax"
I hope you find this informatin useful. If you find any of it
unclear, please request clarification. I would appreciate it if you
would hold off on rating my answer until I have an opportunity to
reply.
Sincerely,
Google Answers Researcher
Richard-ga |
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