EU resident working as a contractor in the US

Question

I am an EU resident interested in becoming an independent contractor for a US based client. My client and I have reached an agreement regarding compensation, and are now looking for a legal setup for our collaboration that works for both parties.

For some reason that is unclear to me at the moment, they are not able to pay international invoices and are requesting that I have some form of legal entity in the US (a single member LLC was suggested). While setting up an LLC is possible (through Stripe Atlas or other similar services) it seems to me that it would complicate my tax situation unnecessarily.

I have previously lived and worked in the US and have a Social Security Number. Would I be able to operate as a sole proprietor using my SSN even as a non-resident? Would I need to pay any taxes in the US by operating this way?

Answer 1

I'm not a tax professional, which is who I think you really need to speak to.

I do believe any form of US business (LLC, S-Corp, Sole Proprietorship, etc.) is going to require you pay US taxes. You can't receive income in the US and not pay taxes in the US.

A Sole Proprietorship is still a business entity even though it's only a single person. Similar to how an single-member LLC is still a business entity even though it's one person.

The only way to avoid any US taxes on income is to not receive income in the US and receive it in your home country - i.e. client pays international invoice.

Unfortunately, the fact that you are going to be be required to pay US taxes may have factored into compensation negotiations. If the inability to pay international invoices was presented after negotiations then you may be able to revisit negotiations. Otherwise, you may be out of luck.

Answer 2

I recommend talking to a US tax professional who has dealt with EU citizens.

According to the IRS web site, the US has agreements with several countries to avoid double taxation. Here is one of their pages on the subject.

https://www.irs.gov/individuals/international-taxpayers/aliens-employed-in-the-us-social-security-taxes#:~:text=Wages%20paid%20to%20nonresident%20aliens%20employed%20within%20the,with%20certain%20exceptions%20based%20on%20their%20nonimmigrant%20status.

and another https://www.irs.gov/individuals/international-taxpayers/totalization-agreements

and a list of the countries with such agreements https://www.ssa.gov/international/agreements_overview.html

If your country is listed, you can find what the agreement is.

What your client is recommending is for you to set up a legal entity in the US and that entity takes the burden of filing the tax forms off of your client. Whether or not that is in your best interest is something that you and your business and tax advisors get to hash out.