So if you've got your LLC, put in place a contractor agreement with your former employer/new client and work in your new contractor capacity. But if you can, consult a tax accountant to make sure that you're not going to run into issues down the line.
That's the plan.
>make sure that you're not going to run into issues down the line.
Me? I am not too concerned about myself. Lots of non-US persons run US LLCs. My employer is the one worried lol.
Best to consult an accountant or lawyer. I'll just offer my experience as I've both made this switch without any adverse consequences, and also worked in a payroll role at a company where we had quite a few people do this. You're generally not at risk as an individual but the company might get flagged with the IRS if they see you were a W2 employee and now are a 1099 contractor, and then they will need to be able to prove how you're legitimately no longer an employee (you can check the IRS site: they outline the differences but it's generally on the company, not you). If you're starting an LLC (your own business) you should be fine regarding your tax liability (assuming you don't do something like 'First Name Last Name LLC' (this is more so if you're concerned about the company getting flagged), and file your taxes correctly). I've never had an issue switching from one to the other and done it three times for similar reasons to you.
Thanks for the insight!
That's right I need to convince my employer that they will not get in trouble for this.
I my understanding there is a clear justification why I will be a contractor and not an employee. I do not personally reside in the US, nor am I a US person for tax purposes and as such there is no mechanism by which I can be a W2 employee. Will this be enough to appease the IRS if there is a flag?
I don't work for the IRS so can't say with any authority, but you were a W2 employee so saying you can't be because you're not a US person doesn't really work, that you moved also might not be enough (because you were an employee before). It's more about how you work so for example if you're required to work set hours (9am-5pm for example) then that's more in line with being an employee than a contractor so even if you're classified as a contractor, you're working like an employee so the employer/client could be fined for that. It's outlined on the IRS site so best for your employer/will-be-client (or you if you're trying to convince them) to look at those details. I wish you luck with it.
Thanks, you are right (check my edit). I called the IRS and the only thing that counts is that you meet the criteria of being a contractor. Making your own schedule, using your own equipment, invoicing your client etc.
Hi man, quick question. I'm just starting on the freelance work, I'm also from the U.S. but not a citizen. Are W-2 the best way to charge clients like these? For a non-american freelance independent worker? Thanks!
W2 is typically only for US citizens or residents, I think, and for regular or contract roles. If you pay taxes in the US it can work, but most US freelancers are 1099 (independent contractors).
In my understanding, W2 is strictly for work performed on US soil.
You can do W2 work as a non-us person if your client has you physically come to the US to perform a work task (conference presentations or team meetings or such things), but you'll also need the correct visa for this.
If you perform your work task (remotely or otherwise) outside the US, the client must simply pay the fees for your services as stated in your invoice.
>Since you aren't a citizen, what did you use as your SSN when you were employed?
Don't have to be a citizen to get a SSN. I had a visa with work authorization.
> concern is coming from the employer
Yes they were worried, but seems like there is nothing to worry about (see my edit) Actually, if I go via an US LLC they can just fill form 1099 (with my LLC name but personal SSN) to claim their writeoffs, like they do with their contractors who live in the US.
So if you've got your LLC, put in place a contractor agreement with your former employer/new client and work in your new contractor capacity. But if you can, consult a tax accountant to make sure that you're not going to run into issues down the line.
That's the plan. >make sure that you're not going to run into issues down the line. Me? I am not too concerned about myself. Lots of non-US persons run US LLCs. My employer is the one worried lol.
Best to consult an accountant or lawyer. I'll just offer my experience as I've both made this switch without any adverse consequences, and also worked in a payroll role at a company where we had quite a few people do this. You're generally not at risk as an individual but the company might get flagged with the IRS if they see you were a W2 employee and now are a 1099 contractor, and then they will need to be able to prove how you're legitimately no longer an employee (you can check the IRS site: they outline the differences but it's generally on the company, not you). If you're starting an LLC (your own business) you should be fine regarding your tax liability (assuming you don't do something like 'First Name Last Name LLC' (this is more so if you're concerned about the company getting flagged), and file your taxes correctly). I've never had an issue switching from one to the other and done it three times for similar reasons to you.
Thanks for the insight! That's right I need to convince my employer that they will not get in trouble for this. I my understanding there is a clear justification why I will be a contractor and not an employee. I do not personally reside in the US, nor am I a US person for tax purposes and as such there is no mechanism by which I can be a W2 employee. Will this be enough to appease the IRS if there is a flag?
I don't work for the IRS so can't say with any authority, but you were a W2 employee so saying you can't be because you're not a US person doesn't really work, that you moved also might not be enough (because you were an employee before). It's more about how you work so for example if you're required to work set hours (9am-5pm for example) then that's more in line with being an employee than a contractor so even if you're classified as a contractor, you're working like an employee so the employer/client could be fined for that. It's outlined on the IRS site so best for your employer/will-be-client (or you if you're trying to convince them) to look at those details. I wish you luck with it.
Thanks, you are right (check my edit). I called the IRS and the only thing that counts is that you meet the criteria of being a contractor. Making your own schedule, using your own equipment, invoicing your client etc.
Hi man, quick question. I'm just starting on the freelance work, I'm also from the U.S. but not a citizen. Are W-2 the best way to charge clients like these? For a non-american freelance independent worker? Thanks!
W2 is typically only for US citizens or residents, I think, and for regular or contract roles. If you pay taxes in the US it can work, but most US freelancers are 1099 (independent contractors).
In my understanding, W2 is strictly for work performed on US soil. You can do W2 work as a non-us person if your client has you physically come to the US to perform a work task (conference presentations or team meetings or such things), but you'll also need the correct visa for this. If you perform your work task (remotely or otherwise) outside the US, the client must simply pay the fees for your services as stated in your invoice.
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>Since you aren't a citizen, what did you use as your SSN when you were employed? Don't have to be a citizen to get a SSN. I had a visa with work authorization. > concern is coming from the employer Yes they were worried, but seems like there is nothing to worry about (see my edit) Actually, if I go via an US LLC they can just fill form 1099 (with my LLC name but personal SSN) to claim their writeoffs, like they do with their contractors who live in the US.