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International taxation help needed - US-France double tax treaty and LLC implications
I need some help with international tax issues. My business partner has a thriving construction company here in the US, and we're looking at a major expansion by buying out a competitor. His mother, who lives in France (not a US citizen), wants to invest a substantial amount to help fund this acquisition as part of her estate planning strategy. Our accountant is pretty sharp with domestic issues but admits this international situation is outside his comfort zone. The current structure is an operating corporation with some properties held in a separate LLC partnership that leases back to the main company. The plan our accountant suggested is creating a US single-member LLC as a holding company where the mother would own a percentage of the operating company through this structure. She also wants to use this same LLC to make various US stock market investments unrelated to our construction business. She won't have any ownership in the real estate LLC partnership. My main question: Since this would be a disregarded single-member LLC, would dividends from the operating corporation to the LLC be considered paid directly to the French mother? And if so, would that mean a 15% tax rate on those dividends under the US-France double tax treaty? Any insights from someone with international tax expertise would be incredibly helpful! This is a significant opportunity for the business, but we want to make sure the structure is optimal for everyone involved.
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Does W-2 Third Party Sick Pay qualify as earned income for ABLE Account additional contributions?
I've been collecting taxable W-2 third party sick pay for about 8 months now, and I know it counts as earned income for my Roth IRA and for the Earned Income Credit. But I'm trying to figure out if it also counts as earned income for making additional contributions to my nephew's ABLE account beyond the standard $18k annual gift tax limit. I found some information in IRS publications that says: "Earned income. If you are retired on disability, benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age." It also mentions that certain employed ABLE account beneficiaries can make additional contributions up to either their compensation for the tax year or the poverty line amount ($13,590 in continental US, $15,630 in Hawaii, $16,990 in Alaska). The instructions for 1099-QA and 5498-QA forms say the additional contribution can be up to the lesser of: - The designated beneficiary's compensation (IRC section 219(f)(1)) - The poverty line amount for a one-person household Looking at California's ABLE contribution form, it states you can only make an ABLE to Work contribution if: - The Beneficiary is earning wages - The contribution is less than or equal to the Beneficiary's gross income - The Beneficiary hasn't contributed to a 401K, 403(b), or 457(b) plan this calendar year My nephew isn't currently working but does receive about $22,500 in W-2 third party sick pay annually. Would this qualify him to make additional contributions beyond the $18k limit? Would it be worth paying $12k for a private letter ruling in this situation? It seems expensive but could potentially open up more tax-advantaged investment space, since he's otherwise limited to just $7k in Roth IRA plus the standard $18k ABLE contribution.
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I work with special needs financial planning, and I think everyones missing a detail - check whether your nephew has other income sources that might qualify. Even part-time or gig work counts! If he could earn even a small amount from actual employment (like $2-3k annually), that would enable additional ABLE contributions up to that earned amount. Many of my clients do minimal part-time work specifically for this purpose.
This is really good advice. My brother does like 5 hours of work per week at a local store and it qualifies for the extra ABLE contribution. Doesn't have to be much!
This is such a helpful discussion! I'm dealing with a similar situation with my sister's ABLE account. Based on everything shared here, it sounds like the consensus is that W-2 third party sick pay doesn't qualify for the additional ABLE contribution beyond the $18k limit. The key distinction seems to be that while sick pay counts as "earned income" for many tax purposes, the ABLE additional contribution provision specifically targets current employment as a work incentive. The "earning wages" language in state forms appears to reflect this narrower federal intent. @Alice Coleman - that's a great point about exploring minimal employment options! Even small amounts of actual wages could unlock that additional contribution space. For someone receiving $22.5k in sick pay, adding even $5k in actual earned income could provide significant additional tax-advantaged savings opportunities. Has anyone here actually tried making the additional contribution with only sick pay income and had issues, or is this all based on guidance and interpretations? I'm curious if there are any real-world examples of problems arising.
Will My 2024 Tax Refund Be Delayed by IRS Audit of 2022 Taxes Due March 26, 2025?
Just got my first audit letter for 2022 taxes - the IRS letter was issued on 02/24/2025 with a response due date of 03/26/2025. According to my IRS online account, the audit start date is showing as 02/24/2025. When I log into the IRS website at sa.www4.irs.gov, I can see the following information: Open Audits Tax Year 2022 Start Date: 02/24/2025 Letter Issued Date (Most Recent): 02/24/2025 Response Due Date: 03/26/2025 Looking at the "Closed Audits" section, it says "Information is only available for audits closed within the last three months" and "There is no audit information to show at this time." So I have no previous audit history. I'm really worried about how this affects my current tax year filing. Has anyone dealt with this? What should I expect and will this delay my 2024 refund? The IRS website is clearly showing this as an "Open Audit" and I'm not sure what to make of all these dates and deadlines. The website mentions "for more specific details, please refer to the letters you have received" but the letter doesn't give me much information about the process. Will I be able to get my refund for 2024 while this 2022 audit is still open? Should I wait to file my 2024 taxes until this is resolved? I'm stressing out about this timing since tax day is approaching fast.
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Dont panic! I went thru this last yr. Just be organized, respond on time, and stay on top of any followup letters. And def get a tax pro if its complicated.
I've been through a similar situation! Your 2024 refund shouldn't be automatically held up just because you have an open 2022 audit - they're separate tax years. However, the IRS might take a closer look at your 2024 return if there are patterns they're investigating from 2022. My advice: Don't delay filing your 2024 taxes. File on time and separately handle the 2022 audit. The key is responding to that March 26th deadline with complete documentation. I'd also suggest calling the IRS practitioner priority line if you have a tax pro helping you, or the regular taxpayer line to confirm they received your response once you send it. One thing that helped me was creating a timeline of all correspondence and keeping detailed records of what I sent and when. The online account tracking is helpful but sometimes lags behind actual processing.
Single Member LLC - What is Maximum Profit Sharing Contribution Limit for Solo 401k?
Hey tax folks, I run a Single Member LLC that's taxed as an S-Corp and I'm the only employee. I'm trying to figure out the maximum profit sharing contribution I can make to my Solo 401k. Here's my situation: My LLC brought in around $42k this year, with about $7k in eligible business expenses. I've paid myself $13.5k in W-2 wages as the employee. I've already made employee contributions of $5.4k to my Solo 401k. What I'm confused about is calculating the maximum amount I can contribute as an employer to the Solo 401k profit sharing portion. I've read somewhere that it's 25% of something, but I keep finding conflicting information online about exactly what that calculation is based on. Is it 25% of my W-2 compensation? Or is it based on net business profits? I want to maximize my retirement savings but also stay compliant with IRS rules. Can someone break down the actual calculation for me? Thanks in advance!
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Is the 25% employer contribution calculated BEFORE or AFTER the employee contribution is taken out of the W-2 wages? This always confuses me.
The 25% employer contribution is based on the gross W-2 wages, NOT reduced by the employee contribution amount. So in the original poster's case, it would be 25% of $13,500, regardless of how much they contributed as an employee. The employee contribution (traditional pre-tax) does reduce taxable income on their personal tax return, but doesn't affect the calculation for the employer contribution amount.
Thanks for explaining! That clears it up. I've been calculating it wrong all this time.
Just want to add something nobody's mentioned yet - if your LLC has high profit margins, you might actually benefit from changing your tax election from S-Corp to Schedule C sole proprietor. As a sole prop, you can contribute up to 20% of your net self-employment income as employer contributions, which could potentially be higher than the S-Corp 25% of W-2 wages if you're keeping your salary low to save on employment taxes.
Yes, you'd pay more in self-employment taxes as a Schedule C, so it's definitely a trade-off. Every dollar of business profit would be subject to self-employment tax, whereas with an S-Corp, only your W-2 wages are subject to employment taxes. It really comes down to running the numbers both ways. If maximizing retirement contributions is your primary goal, Schedule C might work better despite higher SE taxes. But if overall tax minimization is the goal, S-Corp usually wins. Most people find the S-Corp advantage outweighs the slightly lower retirement contribution potential, but it depends on your specific situation and priorities.
You're absolutely right to consider the self-employment tax impact. I actually ran into this exact decision point with my consulting LLC last year. For most people, the S-Corp election saves more in employment taxes than you'd gain from the slightly higher retirement contribution limits as a Schedule C. The break-even point is typically when your net business income is around $60k+ annually, but it varies based on your specific tax situation. In Fatima's case with $42k revenue and $7k expenses, she's looking at about $35k net profit. As Schedule C, she'd pay SE tax on the full $35k (~$4,900) but could potentially contribute around 20% of net SE income after the SE tax deduction to her SEP-IRA. With S-Corp, she saves on SE taxes but is limited by her W-2 wages for retirement contributions. Given her current numbers, the S-Corp election probably makes more sense from a total tax perspective, but it might be worth modeling both scenarios for next year if her income grows significantly.
Is it possible to file my taxes completely from my phone? Any apps that work well?
So I'm in a bit of a situation this tax season. My laptop died last month and I can't afford a new one right now. I don't have access to a computer at home and honestly I'm super paranoid about using public computers at the library to file my taxes (identity theft stories have me freaked out). I need to get my taxes done soon but I'm wondering if it's even possible to do everything from my phone? Like downloading forms, entering all my info, and submitting everything officially to the IRS? Has anyone done this successfully? If this is possible, what apps or websites would you recommend that work well on mobile? I have a pretty basic Android phone, nothing fancy. I only have a W-2 from my main job and a 1099 from some side gig work I did, so my taxes aren't super complicated. Any advice would be really appreciated!
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Has anyone tried filing through mobile web browsers instead of apps? My phone doesn't have much storage left for another app but I still need to file from it.
I filed through FreeTaxUSA's mobile website last month and it worked fine on Chrome on my Android. The interface adjusts pretty well to phone screens. Just make sure you have a stable internet connection since browser-based filing doesn't save locally like some apps do.
I actually filed my taxes completely from my phone this year and it was way easier than I expected! I used TurboTax Mobile and the whole process took about 2 hours spread over a couple evenings. The photo capture feature for uploading documents worked really well - just snap pics of your W-2 and 1099 and it pulls all the info automatically. Way better than typing everything manually on a small screen. The app walks you through each section step by step, so you don't miss anything important. Since you mentioned being worried about security, I'd definitely stick with the major established providers like TurboTax, H&R Block, or FreeTaxUSA. They all have strong security measures and are authorized IRS e-file providers. Just make sure to download directly from the official app store and look for the verified developer badges. One tip: have your documents organized before you start since switching between apps to find info can be annoying on mobile. Good luck with your filing!
Mateo Sanchez
Make sure you're considering the Form 8832 "check-the-box" implications here. A single-member LLC is automatically disregarded for US tax purposes unless you elect to have it treated as a corporation by filing Form 8832. Sometimes it's actually beneficial to elect corporate treatment for a foreign-owned LLC to simplify reporting and avoid certain direct ownership issues, even though it creates a separate taxable entity. The French investor should also check with a French tax advisor since the French tax treatment of the LLC might not match the US treatment.
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Aisha Mahmood
This is really important! France might not recognize the disregarded entity concept the same way the US does. I had a client from Paris with a similar structure and the French tax authorities treated the LLC as a separate entity regardless of the US tax classification, creating a huge reporting headache.
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Laila Prince
This is exactly the kind of complex international tax situation where you really need specialized expertise. I've dealt with similar French investment structures and there are several additional considerations beyond just the treaty withholding rates. One thing that hasn't been mentioned is the potential French wealth tax (IFI) implications. If the mother is a French tax resident, her ownership in US real estate through the LLC structure could trigger French wealth tax obligations, even if she doesn't directly own the real estate LLC partnership you mentioned. Also, consider the timing of distributions. The US-France treaty has specific tie-breaker rules for determining tax residence that could affect the treaty benefits if there's any question about her French residency status. Make sure she maintains clear documentation of her French tax residency. Given the substantial investment amount you mentioned, I'd strongly recommend getting a formal opinion from someone who specializes in US-France tax matters before finalizing the structure. The cost of proper planning upfront will be much less than trying to unwind a problematic structure later, especially with the recent changes to international reporting requirements. The suggestions about getting direct IRS guidance are also solid - having official confirmation of how they'll view the structure can provide valuable certainty for everyone involved.
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