3.1 Tax Benefits
36. What tax benefits does an LLC offer?
- An LLC is exempt from paying taxes in the U.S. (before the IRS) as long as all the following characteristics are met:
- The member of the LLC does not reside in the U.S.
- The member of the LLC is not a U.S. person.
- The LLC has no physical presence in the U.S.
- The LLC has no employees in the U.S.
37. When do I lose the tax benefits provided by an LLC?
You lose the benefits when one or more of the aforementioned characteristics are not met.
3.2 Tax Obligations
38. What is the basis for filing the Tax Return with the IRS?
The filing is based on the income and expenses incurred by the LLC during the fiscal year preceding the year in which the Tax Return is filed (for example, the 2023 tax return must be filed in 2024).
39. What happens if I don't file a Tax Return with the IRS?
Your LLC could be fined up to $25,000 if it is a single-member LLC. For multi-member LLCs, monthly penalties may be imposed depending on the violation. Additionally, if you have issues with the IRS, you could encounter problems during travel to the U.S. if you do not reside in the country.
40. What is the penalty for late filing of a Tax Return with the IRS?
The penalty depends on the IRS, as multiple factors are considered, including the number of members in the LLC and the delay in filing the Tax Return. The exact penalty amount is usually determined a few weeks after the late Tax Return is submitted.
41. How do I find out the amount of the penalty the IRS has imposed on my LLC for late filing?
The IRS will issue a letter with this information and the deadline for payment. This letter is sent to the address your LLC registered with the IRS when the EIN was obtained. The IRS sends the letter via regular mail, and it is the LLC owner’s responsibility to monitor and pay it within the specified timeframe to avoid additional charges.
42. Can a penalty imposed by the IRS on my LLC be appealed?
Yes, it can be appealed, but the decision to reduce or waive the penalty is entirely up to the IRS.
43. Do I have to pay for the service of appealing a penalty imposed on my LLC by the IRS?
 If you want us to handle the appeal on behalf of your LLC, our service costs $200.00 and is non-refundable. Alternatively, you can appeal the penalty directly. The IRS provides options for doing so in the letter detailing the penalty.
44. What is the difference between a Franchise Fee (FF) and a Tax Return?
FF is a tax that some states charge LLCs annually. A Tax Return is the annual income tax filing that every LLC must submit to the IRS.
45. Can I dissolve my company before filing the Income Tax Return with the IRS to avoid filing it?
No, from the moment an LLC is formed, there is an obligation to file an Income Tax Return with the IRS. To dissolve an LLC, a final Income Tax Return must be filed.
46. What happens if my LLC generates thousands of dollars in revenue at the end of the year? Does it need to pay taxes in the U.S.?
 An LLC is exempt from paying taxes to the IRS provided it meets all of the following conditions:
- The LLC does not have a physical presence in the U.S.
- The LLC does not have employees in the U.S.
- The members of the LLC do not reside in the U.S.
- The members of the LLC are not U.S. persons.
47. If I sell on Amazon, do I need to pay taxes?
If you are a U.S. person or U.S. resident, yes. If you do not reside in the U.S. and do not have employees or physical presence, you benefit from tax exemptions.
3.3 IRS Communication
48. I received a letter from the IRS with the identifier code CP 282. What should I do?
This letter indicates that your LLC may need to file additional forms to complement the Tax Return you already submitted to the IRS. If your LLC received income from U.S. sources, this income is classified as Effectively Connected Income (ECI), meaning it is from U.S. sources. In this case, you must submit additional forms to the IRS. If your LLC’s income is not classified as ECI (i.e., it does not originate from U.S. sources), there is no need to take further action. You are responsible for determining whether your LLC’s income comes from U.S. sources.
49. I received a letter from the IRS with the identifier code LTR 168. What should I do?
Keep it for your records. This is the formal letter issued by the IRS certifying that the penalty for late filing of your LLC’s Tax Return has been waived.
3.4 International Tax Considerations
50. If my LLC ends the fiscal year with economic benefits, would I need to report those benefits in my country?
You should consult with an accountant or tax expert in your country.
51. Should I consult with an accountant or tax expert in my country, given that you do not provide tax or accounting advisory services?
Yes, you should consult with an accountant or tax expert in your country as we do not offer tax or accounting advisory services.
52. If I have a U.S. Social Security Number because I obtained it while studying in the U.S., does this affect the tax benefits I have as a non-resident foreigner in the U.S.?
No, it does not.
53. Will the U.S. share my information with the government of my country of tax residence?
The U.S. government does not automatically share information with foreign governments. When it does, it is due to an order from a competent authority in the U.S., such as a prosecutor or court conducting a case or judicial investigation involving a specific individual or entity.
54. Does an LLC need to include VAT on its invoices?
No, the LLC invoices net amounts.