Income Tax

In the United States, by law every businesses and individuals must file an income tax return annually, a requirement that applies universally, regardless of the composition of the company. This obligation extends to companies with foreign partners.

The income tax, a foundational component of the federal taxation system, is computed based on a company's net profit throughout its fiscal year. This compulsory financial obligation is an annual imperative, with specific declaration dates customized to accommodate the distinctive circumstances of each business entity.

Knowing and reviewing all income tax compliance can be a complex task for companies. In light of these challenges, Prodezk stands as a reliable partner for your company's tax-related needs in the United States. Our adept team of professionals specializes in streamlining the process of filing income taxes, providing comprehensive support tailored to your company's specific requirements.

By engaging Prodezk with your income tax filing, you secure confidence not only in fulfilling your regulatory obligations but also in acquiring comprehension of tax laws. Our dedication is aimed at alleviating the burden on your company, enabling you to reallocate your focus to the fundamental aspects of your business.

Our services encompass every facet of the income tax declaration process, from meticulous documentation to strategic planning. Our goal is to optimize your tax liability within the legal framework, ensuring a seamless and compliant experience.

Whether your company has international partners, necessitating a nuanced approach to taxation, or operates solely within the domestic sphere, Prodezk offers tailored assistance. We invite you to take a proactive step towards effortless income tax compliance by contacting our team of experts. For further information on how Prodezk can work as your trusted partner in the realm of income tax declaration, please do not hesitate to get in touch. Your financial peace of mind is our priority.

C-Corporations play a fundamental role in the U.S. tax landscape, as they are obligated to file and remit taxes as a corporate entity. The tax liability is determined by applying a fixed rate of 21% to the net profit derived by the company during its preceding fiscal year.

Notably, when a C-Corporation distributes dividends, it assumes the responsibility of withholding tax a portion of the dividend amount and remitting it to the Internal Revenue Service (IRS). The withholding tax rates are contingent upon the tax residency status of the recipients and whether their respective countries have a double taxation agreement with the United States.

For non-U.S. residents and individuals residing in nations lacking a double taxation agreement with the U.S., the withholding rate stands at 30% of the declared dividends. Conversely, for residents, corporations, and non-residents from countries with a double taxation agreement in place, the withholding rate is reduced to 21% of the declared dividends.

It is crucial to underscore that foreign natural persons receiving income exclusively from dividends need not file a personal tax return. This exemption is contingent on dividends being the sole source of income during the relevant tax period. This nuanced detail serves as a notable exception in the tax reporting landscape, streamlining the process for foreign individuals with a straightforward income source from dividends.

Income tax considerations play a crucial role in the taxation of S Corporations (S-Corps). Unlike some other business structures, S-Corps are taxed on a personal basis, making the individual partners responsible for the company's taxes, akin to a Limited Liability Company (LLC).

The taxation process involves applying varying percentages, ranging from 10% to 37%, on the global profit generated by the S-Corp. It is essential to note that these percentages are determined based on the overall value of the company's profits.

Moreover, eligibility for partnership in an S-Corp is restricted to American residents only. This means that individuals who can become partners and share in the tax responsibilities must be citizens or residents of the United States.

For a comprehensive understanding of the structural nuances of an S-Corp, and for more details on how income tax impacts this business entity, we recommend exploring additional information available here.

Limited Liability Companies (LLCs) operate under a unique tax structure with a personal touch. In the realm of LLCs, the responsibility for taxes lies with the individual partner who owns the company.

The taxation process involves applying different percentages, ranging from 10% to 37%, on the global profit generated by the LLC. This taxation model provides flexibility, aligning the tax burden with the individual partners' financial interests.

However, there are important considerations for foreign partners. To fulfill personal tax declarations, foreign partners must obtain an Individual Taxpayer Identification Number (ITIN) beforehand.

In the case of LLCs with two or more members, the entity is taxed as an LLC partnership. For foreign partners in this scenario, a 37% retention is applied to their share of the global profit. It's worth noting that this withholding can be later deducted in the personal tax return. In the event of a credit balance, the IRS will issue a refund check for the withheld amount.

For detailed insights into the structural and tax intricacies of an LLC, including how income tax impacts this business entity, refer to additional information here.

Tax forms in the United States play a key role in the tax system, and their use varies depending on the business structure. 

Form 1120 is used for corporate (C Corp) tax returns. In the case of C Corps, taxes are paid at the entity level using this form, and shareholders do not directly report the corporation's income and losses on their personal tax returns.

On the other hand, Form 1040 is used for individual personal tax returns. If it is a single-member LLC, income and losses are reported on the owner's personal return using Form 1040.

For non-U.S. resident individuals, Form 1040NR is essential. Foreign partners of an LLC can use this form to report and pay taxes on LLC income.

In the context of partnerships, such as LLCs with two or more members, Form 1065 is used. This form is used to report the LLC's income and losses, and these amounts are distributed among the partners. The partners, in turn, report these amounts on their personal tax returns.

Form 5472 is used to report transactions between foreign entities and U.S. corporations, which is crucial for businesses that have foreign ownership.

Finally, Form 1120F is used by foreign corporations operating in the United States. It allows reporting income and business activities in the country, ensuring tax compliance for these entities.

At prodezk we understand that this can be a confusing and complex process, that is why we provide you with the guidance and support you need to complete your income tax return. Contact us now, we will be happy to work with you.