I have a few tax questions and read some articles from the IRS but still got confused, hoping anyone in this forum could help me out a bit.
Scenario
I am a Hong Kong permanent resident without US citizenship nor US permanent resident status (no SSN, TIN, or EIN) trying to establish a sole proprietorship located in Hong Kong. This entity will provide service online daily (without any physical or tangible products) to a US corporation in Illinois as an overseas independent contractor. Payment for the service will be made either weekly or bi-weekly with a company check (drawn on a bank in US) mailed to Hong Kong and deposited by me into my personal local bank account in Hong Kong.
Questions
1) Under such a scenario, will I be subject to US taxation? If yes, how do I report my income to both US federal and state government?
2) Will I be subject to the economic nexus legislation of Illinois State? If yes, what would be the threshold to trigger the economic nexus?
Short answers are NO & NO.
The payer should get a form W-8BEN signed by You ... the foreign contractor. By signing Form W-8BEN, the foreign contractor is certifying that he or she is not a U.S. person. The Form W-8BEN is not filed with the I.R.S. It is kept on file with the U.S. payor in case the U.S. payor is audited. If audited, the Form W-8BEN supports why no Form 1099 was issued and why no tax was withheld.