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Old 01-08-2014, 03:06 PM
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Foreigner started a C-Corp in California, with no Profit Distribution/Salary. Does he need to File Personal Tax Return with IRS and State?

I am here in California on a B2 visa to start a C-Corp. After the incorporation process and opening the bank accounts etc. I will return to my home country. I will visit the US a few times a year on B2, but less than 180 days a year.

My company will be a small internet company targeting US audience. I don't plan to pay myself any salary or dividend in the first few years.

However, I heard that as a C-Corp owner, I need to file personal tax returns with the IRS and the State even when I don't receive any income from the corp (all boxes on the tax return form being 0??). Is that truely required, both the IRS and CA, even if I am not a permanent US resident?

Thanks.



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Old 01-09-2014, 01:16 AM
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Originally Posted by cyrix View Post


#1;I am here in California on a B2 visa to start a C-Corp. After the incorporation process and opening the bank accounts etc. I will return to my home country. I will visit the US a few times a year on B2, but less than 180 days a year.My company will be a small internet company targeting US audience. I don't plan to pay myself any salary or dividend in the first few years.




#2;However, I heard that as a C-Corp owner, I need to file personal tax returns with the IRS and the State even when I don't receive any income from the corp (all boxes on the tax return form being 0??). Is that truely required, both the IRS and CA, even if I am not a permanent US resident?

Thanks.
#1; generally a foreign person can form a corp in US. The corp is formed by an incorporator initially, often a lawyer, who will then resign in favor of the shareholders (owners) of the corpo. You need not be resident of the US and can conduct business from outside of the US. It is required that the corporation always identify a "registered office" in the U.S. and a "registered agent" who must be a resident of CAstate; Your corp will have to file an annual tax return . If your corp has no income and has some expenses, then, you're not required to file, but reporting the expenses alone will help you to get some deductions.Your State of Incorporation will also probably request that you renew your incorporation via a form which updates the address of the corporation, its officers and directors, and its registered agent for service of process. First off You should file the Federal 1120 if for no other reason then having a net operating loss carry fwd for furture years if you plan on staying in business. Second, you my have a "Franchise Tax" due on the state level. A franchise tax is a right to do business tax. This is EVEN if you have Zero income. In CA there is a Franchise Tax of $850 for the taxpayers first year of biz. This is even if there is no income at all.



#2;A major step in strategizing your business is planning to minimize your US and international taxes. To achieve this goal you have to structure transfer price between your US and international entities, set up income and expenses budget and maximize tax deductions and benefits. To comply with federal and state laws, the entity must file quarterly reports, pay estimated taxes and file annual tax returns to report the entity's income, expenses, profits and taxes as well as the owners income from the entity's profits.



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Old 01-09-2014, 02:41 AM
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Originally Posted by Wnhough View Post
#1; generally a foreign person can form a corp in US. The corp is formed by an incorporator initially, often a lawyer, who will then resign in favor of the shareholders (owners) of the corpo. You need not be resident of the US and can conduct business from outside of the US. It is required that the corporation always identify a "registered office" in the U.S. and a "registered agent" who must be a resident of CAstate; Your corp will have to file an annual tax return . If your corp has no income and has some expenses, then, you're not required to file, but reporting the expenses alone will help you to get some deductions.Your State of Incorporation will also probably request that you renew your incorporation via a form which updates the address of the corporation, its officers and directors, and its registered agent for service of process. First off You should file the Federal 1120 if for no other reason then having a net operating loss carry fwd for furture years if you plan on staying in business. Second, you my have a "Franchise Tax" due on the state level. A franchise tax is a right to do business tax. This is EVEN if you have Zero income. In CA there is a Franchise Tax of $850 for the taxpayers first year of biz. This is even if there is no income at all.



#2;A major step in strategizing your business is planning to minimize your US and international taxes. To achieve this goal you have to structure transfer price between your US and international entities, set up income and expenses budget and maximize tax deductions and benefits. To comply with federal and state laws, the entity must file quarterly reports, pay estimated taxes and file annual tax returns to report the entity's income, expenses, profits and taxes as well as the owners income from the entity's profits.

Thanks a lot for your detailed answer.. but it still hasn't address the question in my title: Is this foreign person required to file personal tax return to the IRS during the years he has received no income from the c-corp (nor any other income in the US)?

Thanks again.



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Old 01-09-2014, 02:43 AM
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Thanks a lot for your detailed answer.. but it still hasn't address the question in my title: Is this foreign person required to file personal tax return to the IRS during the years he has received no income from the c-corp (nor any other income in the US)?

Thanks.



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Old 01-09-2014, 11:23 AM
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Originally Posted by cyrix View Post
Thanks a lot for your detailed answer.. but it still hasn't address the question in my title: Is this foreign person required to file personal tax return to the IRS during the years he has received no income from the c-corp (nor any other income in the US)?

Thanks.
A mentioned previously,you need to file form 1120-F as long as your corp was engaged in a trade or business in the US whether or not it had U.S. source income from that trade or business, and whether or not income from such trade or business is exempt from US tax under a tax treaty. ;had income, gains, or losses treated as if they were effectively connected with the conduct of a U.S. trade or business; was not engaged in a trade or business in the US, but had income from any U.S. source, if its tax liability has not been fully satisfied by the withholding of tax at source under chapter 3 of the Code


NOTE; so you need to fiel your C corp return with the IRS ASLONG AS the foreign corp makes a claim for the refund of an overpayment of tax for the tax year; the foreign corpo claims the benefit of any deductions or credits; the foreign corp makes a claim that an income treaty overruled or modified any provision of the Internal Revenue Code with respect to income derived by the foreign corporation at any time during the tax year, and such position is required to be disclosed on Form 8833.


reporting the expenses alone will help you to get some deductions, NOL dedcution I mean if you continuously do biz in US.I mean;you need to file Form 1120-F to report the losses( as you have no gain/income), deductions, credits, and to figure the U.S. income tax liability /NOL deductions. Also,you may file Form 1120-F to claim any refund that is due or to calculate and pay tax on excess interest, if any, under section 884.


HOWEVER, your corporation does not have to file Form 1120-F ; It did not engage in a U.S. trade or business during the year, and its full U.S. tax was withheld at source; its only U.S. source income is exempt from U.S. taxation under section 881(c) or (d);it is a beneficiary of an estate or trust engaged in a U.S. trade or business, but would itself otherwise not need to file.



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Old 01-09-2014, 01:54 PM
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Originally Posted by Wnhough View Post
A mentioned previously,you need to file form 1120-F as long as your corp was engaged in a trade or business in the US whether or not it had U.S. source income from that trade or business, and whether or not income from such trade or business is exempt from US tax under a tax treaty. ;had income, gains, or losses treated as if they were effectively connected with the conduct of a U.S. trade or business; was not engaged in a trade or business in the US, but had income from any U.S. source, if its tax liability has not been fully satisfied by the withholding of tax at source under chapter 3 of the Code


NOTE; so you need to fiel your C corp return with the IRS ASLONG AS the foreign corp makes a claim for the refund of an overpayment of tax for the tax year; the foreign corpo claims the benefit of any deductions or credits; the foreign corp makes a claim that an income treaty overruled or modified any provision of the Internal Revenue Code with respect to income derived by the foreign corporation at any time during the tax year, and such position is required to be disclosed on Form 8833.


reporting the expenses alone will help you to get some deductions, NOL dedcution I mean if you continuously do biz in US.I mean;you need to file Form 1120-F to report the losses( as you have no gain/income), deductions, credits, and to figure the U.S. income tax liability /NOL deductions. Also,you may file Form 1120-F to claim any refund that is due or to calculate and pay tax on excess interest, if any, under section 884.


HOWEVER, your corporation does not have to file Form 1120-F ; It did not engage in a U.S. trade or business during the year, and its full U.S. tax was withheld at source; its only U.S. source income is exempt from U.S. taxation under section 881(c) or (d);it is a beneficiary of an estate or trust engaged in a U.S. trade or business, but would itself otherwise not need to file.


But this C-Corp is incorporated in California, and the foreigner owner is an individual, why is 1120-F needed here? The corp is not foreign, and the foreigner is not a corp.

Thanks.



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Old 01-09-2014, 02:12 PM
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But this C-Corp is incorporated in California, and the foreigner owner is an individual, why is 1120-F needed here? The corp is not foreign, and the foreigner is not a corp.

Thanks.



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Old 01-09-2014, 02:16 PM
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Originally Posted by cyrix View Post
Thanks a lot for your detailed answer.. but it still hasn't address the question in my title: Is this foreign person required to file personal tax return to the IRS during the years he has received no income from the c-corp (nor any other income in the US)?

Thanks.
Ok you are correct it is my bad( I got confused myself onyour situation); Generally, there are no restrictions on foreign ownership of a company formed in the United States. The procedure for a foreign citizen to form a company in the United States is the same as for a US resident. It is not necessary to be a US citizen or to have a green card to own a corporation or limited liability company formed in the United States.



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Old 01-09-2014, 04:35 PM
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Is this foreign person required to file personal tax return to the IRS during the years he has received no income from the c-corp? Thank you very much.



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Old 01-09-2014, 04:55 PM
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It depends; aslong asyou are a nonresident alien individual engaged or considered to be engaged in a trade or business in the US during the year. You must file even if your income did not come from a trade or business conducted in the US;you have no income from U.S. sources, or your income is exempt from income tax, then you must file a return, I guess both fed and CA returns.As mentioned previously, you must also file an income tax return if you want to claim a refund of overwithheld or overpaid tax, or claim the benefit of any deductions or credits. For example, if you have no U.S. business activities but have income from real property that you choose to treat as effectively connected income, you must timely file a true and accurate return to take any allowable deductions against that income.i guess you cancontact a CPA/IRAEA in your local area for more professional help in detail.



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