Overview, Part 7:  Inbound: U.S. Tax on Nonresidents
Channel: International Tax
Date: 2017-11-20

OV P7 Key
Learn the basics of how nonresident individuals and foreign corporations are taxed on U.S. income.  See part xx for 

a definition of resident.  In this video, you'll hear:
00:00  Introduction
00:27  What is taxed
00:43  Wages
01:20  Business income
02:35  Withholding of tax on other than business income or wages
03:18  30% tax rate
03:37  Who must withhold
04:43  FATCA withholding by foreign payors
05:04  Quiz
05:14  Income of partnerships: payment of foreign partners' tax
06:58  Closing


Quiz:
1.  Fred, a single U.S. citizen, moves to Upper Slobenia in 2013 and doesn't come back.  He earns $90,000 in 2014, 

on which he pays $5,000 of Slobenia salaries tax as a resident.  What is his net U.S. income tax in 2014? 
  a. Zero
  b. About $11,000
  c. About $16,000
2.  In 2015, Fred comes back to the USA for all of April and May on unpaid leave, and then goes back.  He has the 

same total income and Slobenia tax.
  a. Zero
  b. About $11,000
  c. About $16,000
3.  Mega, Inc. hires Johan, a German resident, to work for it in Nevada.  Mega pays him $10,000 per month. He only 

works 2 months.  Which of the following is the safest (for Mega) treatment of amounts paid to Johan? 
  a. Report on 1099, no withholding
  b. Report on W-2, regular withholding
4.  Mega separately pays Abdul royalties for a patent used in its plant in Canada.  Abdul is resident of Slobenia.  

What is the appropriate withholding rate?
  a. Zero under some treaty
  b. Zero because it’s not U.S. source
  c. 30%
5.  Mega pays Mike $100,000 of interest.  Mike sends a letter to them with a New Jersey address and a tax ID number. 

 The IRS determines that Mike is not a citizen or resident.  What’s the most Mega must now pay the IRS?
  a. Nothing; it’s Mike’s tax
  b. $30,000 plus interest
  c. $30,000 plus 10% late penalty plus interest
  d. $60,000 plus 10% late penalty plus interest

Resources:
26 USC 871-894
26 USC 1441
26 USC 1446

Form W8-BEN
Form 1040NR
Form 1120F

Quiz answers:
1.a., 2.a., 3.b., 4.b., 5.a.