Key Takeaways
- Non-citizens without an SSN can obtain an ITIN (Form W-7) from the IRS — an ITIN is sufficient to file federal and most state tax returns and to receive business funding from Bankable.
- Whether you owe US tax on worldwide income or only US-source income depends on the Substantial Presence Test — most H-1B, L-1, and E-2 visa holders are US tax residents for this purpose.
- FBAR (FinCEN 114) is required if you have foreign bank accounts with aggregate balances over $10,000 at any point during the year; penalties for non-filing are severe and automatic.
- S-Corps are not available to non-resident aliens, but LLCs (including single-member and multi-member) and C-Corps are available to business owners regardless of immigration status.
- Bankable reviews two years of tax returns as part of underwriting — businesses that are current on filing and have active payment plans for any balances owed qualify at higher rates than those with unfiled returns.
Tax compliance for non-citizen business owners in the United States sits at the intersection of immigration law, international tax treaties, and federal tax code — three separate bodies of law that interact in ways that surprise even experienced accountants. This guide distills the essentials into an actionable framework you can use to stay compliant, minimize your legal tax burden, and keep your business in the funding-ready position that lenders like Bankable require.
Disclaimer: This guide is for general educational purposes and does not constitute tax advice. Consult a licensed CPA or tax attorney for advice specific to your situation.
Understanding Your Tax Residency Status
The most fundamental tax question for any non-citizen is: are you a US tax resident or a nonresident alien? The answer determines whether you are taxed on your worldwide income (resident) or only on US-source income (nonresident).
You are a US tax resident if you meet either of two tests. First, the Green Card Test: if you hold a green card (lawful permanent resident status), you are automatically a US tax resident for the entire year. Second, the Substantial Presence Test: you are a resident if you were present in the US for at least 31 days in the current year AND 183 days using a weighted formula (all days in the current year + 1/3 of days in the prior year + 1/6 of days in the year before that).
Most H-1B, L-1, O-1, E-2, and TN visa holders who have been in the US for two or more years will meet the Substantial Presence Test and are taxed as US residents on their worldwide income. F-1 students are generally exempt from the Substantial Presence Test for up to 5 years. J-1 exchange visitors are exempt for 2 years. If you are unsure of your tax residency status, use IRS Publication 519 or consult a tax professional.
ITIN Versus SSN: What You Need to Know
A Social Security Number (SSN) is issued by the Social Security Administration to US citizens, green card holders, and certain authorized workers including H-1B, L-1, O-1, TN, and E-3 visa holders. If your visa work authorization allows you to work in the US, you likely qualify for an SSN and should get one immediately — it is required for W-2 employment, Social Security credits, and most bank and credit applications.
An Individual Taxpayer Identification Number (ITIN) is issued by the IRS to anyone who has a US tax filing requirement but does not qualify for an SSN. ITINs are available to: non-resident aliens with US-source income, spouses and dependents of US citizens or residents, and foreign nationals who do not have work authorization but own US businesses or receive US income. Apply using IRS Form W-7, submitted with your tax return and certified identification documents.
For business purposes, your company uses an EIN — separate from both SSN and ITIN. Bankable accepts applications from business owners with either an SSN or ITIN. Both are treated equally in our underwriting process.
Federal Tax Filing Obligations by Business Structure
| Structure | Tax Return | Who Pays Tax | Non-Citizen Eligible? |
|---|---|---|---|
| Single-Member LLC | Schedule C (1040 or 1040-NR) | Owner pays on personal return | Yes — any status |
| Multi-Member LLC | Form 1065 (partnership) | Partners pay on personal returns | Yes — any status |
| S-Corporation | Form 1120-S | Shareholders pay on personal returns | NO — nonresident aliens ineligible |
| C-Corporation | Form 1120 | Corporation pays 21% flat federal rate | Yes — any owner status |
The most common structure for non-citizen small business owners is a single-member LLC taxed as a sole proprietorship, which requires only a Schedule C attached to your personal Form 1040 (or Form 1040-NR for nonresident aliens). This structure is simple, inexpensive to maintain, and gives you full pass-through treatment of business income and losses.
Once your net business income exceeds approximately $80,000 per year, electing S-Corp treatment for your LLC can reduce self-employment taxes by 15-20%. However, this election is not available to nonresident aliens. If you are a US tax resident (passing the Substantial Presence Test) and have an SSN, S-Corp election is available to you and should be discussed with your CPA.
Self-Employment Tax: The Often-Missed Obligation
If you operate as a sole proprietor or single-member LLC, you owe self-employment tax (SE tax) of 15.3% on net business income up to $176,100 (2026 wage base), plus 2.9% Medicare on amounts above that. This is in addition to income tax. Many new business owners are shocked to find their total tax burden — SE tax plus income tax — exceeds 35% at modest income levels.
The business structure choice is therefore not just an administrative matter. It is a tax planning decision with material cash flow implications that directly affect how much revenue your business retains and, consequently, how much you can qualify for when assessing your Bankability Score.
Quarterly estimated tax payments are required if you expect to owe $1,000 or more in federal taxes for the year. Due dates are April 15, June 15, September 15, and January 15. Failure to make adequate estimated payments results in underpayment penalties of approximately 7% annually on the shortfall. Keep estimated taxes in a separate savings account — treat it as an expense of doing business.
FBAR: The Foreign Bank Account Report
The FBAR (FinCEN Form 114) is one of the most commonly misunderstood obligations facing non-citizen business owners who maintain financial accounts in their home country. If you are a US person — which includes anyone who meets the Substantial Presence Test — and you have a financial interest in or signature authority over foreign bank accounts with an aggregate maximum balance exceeding $10,000 at any point during the calendar year, you must file an FBAR.
Key points about FBAR compliance:
- FBAR is filed separately from your tax return at fincen.gov by April 15, with an automatic extension to October 15 (no separate extension request needed).
- Reportable accounts include bank accounts, brokerage accounts, mutual funds, and certain retirement accounts in foreign countries.
- Non-willful violations carry penalties up to $10,000 per account per year. Willful violations carry penalties up to the greater of $100,000 or 50% of the account balance per violation.
- FBAR is a separate obligation from FATCA (Form 8938, filed with your tax return). Some accounts require reporting under both.
- Criminal prosecution is possible for willful non-compliance. The IRS Offshore Voluntary Disclosure Program exists for those who need to come into compliance late.
State Tax Considerations
State income tax obligations layer on top of federal obligations and vary significantly by state. Nine states currently have no state personal income tax: Alaska, Florida, Nevada, New Hampshire (on wages only), South Dakota, Tennessee, Texas, Washington, and Wyoming. If your business is in one of these states, your state tax burden is dramatically lower.
California deserves special mention: it imposes an $800 annual minimum franchise tax on all LLCs registered or operating in California, regardless of income or profitability. California also has a 1.5% LLC fee on gross revenues above $250,000 annually. Combined with a top marginal state income tax rate of 13.3%, California is among the highest-tax states for small business owners. New York City imposes its own separate income tax on top of New York State taxes.
Non-citizens who travel to multiple states for business may create tax nexus in those states — triggering filing obligations even without a physical office. States are increasingly aggressive about asserting nexus for business activities within their borders, including remote work performed by employees in the state.
How Tax Compliance Affects Bankable Funding
Every Bankable funding application includes a review of the last two years of business tax returns (Form 1120, 1120-S, or Schedule C) and personal tax returns. Lenders use tax returns to verify revenue, confirm business legitimacy, and assess debt obligations that bank statements alone may not reveal.
The following tax-related factors impact your Bankability Score positively:
- Filed returns for all required years — even if you owed and couldn't pay, filed returns show engagement with the system.
- Revenue consistency between tax returns and bank statements — large discrepancies between reported income and deposits are a red flag.
- Active IRS installment agreements — if you have a tax balance, an active payment plan demonstrates responsibility. We accept applicants in installment agreements.
- Appropriate business deductions — businesses with reasonable expense ratios signal operational maturity.
Unfiled returns are the single most common tax-related obstacle in funding applications. If you have unfiled years, engage a CPA before applying. Many CPA firms specialize in catching up non-citizen filers and can often resolve the issue within 30-60 days. Bankable works with applicants throughout the process and can often structure funding around a path to compliance.
Frequently Asked Questions
Non-citizens without an SSN can obtain an ITIN from the IRS by filing Form W-7. An ITIN allows you to file federal and state income tax returns, claim treaty benefits, and comply with US tax obligations. Your business uses an EIN — not your personal SSN or ITIN — for business tax filings.
FBAR (Foreign Bank Account Report) is FinCEN Form 114, required of any US person — including visa holders who meet the Substantial Presence Test — who has financial interest in or signature authority over foreign bank accounts exceeding $10,000 aggregate at any point in the year. Non-compliance penalties start at $10,000 per violation and can reach 50% of the account value for willful violations.
The Substantial Presence Test determines if you are taxed as a US resident or nonresident. You pass if you were present 31+ days in the current year AND 183+ days using the formula: days this year + 1/3 days last year + 1/6 days two years ago. Most H-1B holders who have been in the US for several years are US tax residents.
A single-member LLC is the simplest starting point — it is a disregarded entity taxed on your personal return. S-Corps are excellent for reducing self-employment tax but are NOT available to non-resident aliens. C-Corps are available to any owner regardless of status and benefit from the flat 21% corporate tax rate. For non-citizen owners who are US tax residents, LLC taxed as S-Corp is typically optimal once the business earns $80,000+ net annually.
Yes. Legal business expenses are deductible regardless of immigration status. Ordinary and necessary business expenses including rent, payroll, supplies, software, vehicle use, business travel, professional development, health insurance premiums (for self-employed), and retirement contributions all reduce taxable income exactly as they would for US citizens.
Bankable reviews the last two years of business and personal tax returns as part of underwriting. Consistent filing and tax payment history demonstrates financial responsibility and business legitimacy. Unfiled returns or large unpaid tax liabilities are red flags that can affect approval. Active IRS payment plans are acceptable.
State income tax obligations depend on where your business operates and where you reside. States like Texas, Florida, Nevada, and Wyoming have no state personal income tax. California and New York have among the highest state taxes and also impose franchise taxes on registered LLCs. You may owe tax in multiple states if you have operations across state lines.
FBAR applies to all years in which you meet the Substantial Presence Test or are a green card holder, regardless of when the accounts were opened. Once you become a US tax person, your worldwide financial accounts with aggregate balances over $10,000 are reportable. FBAR is filed separately from your tax return at fincen.gov by April 15 (automatic extension to October 15).
No. Revenue-based funding advances are loans or purchase of future receivables — they are not income and are not taxable when received. The factor fees are generally deductible as a business financing expense. Consult your tax professional to ensure proper characterization on your return.
If your visa expires and you exit the US, you may become a non-resident alien for tax purposes, which changes your filing requirements. Your US-source business income remains taxable. A business entity registered in the US continues to have US tax obligations as long as it is active. You should file a dual-status return for the year of departure.