Are Business Taxes Different for Immigrant Business Owners?

Are Business Taxes Different for Immigrant Business Owners?

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It is impossible to provide a thorough history of small business in the United States without dedicating a fair share of time to immigration. Immigrants have always played a significant and positive role in the development of our economy. According to a report by the Center of American Entrepreneurship, the impact of immigration on the business world remains strong, as nearly half of yearly Fortune 500 lists are made up of businesses that were started by first or second-generation immigrants. From iconic “American” companies like Ford, AT&T, and Proctor & Gamble to fairly modern organizations like Google and Chobani, immigrant-run businesses are deeply woven in the US culture and economy. But what about our tax system? Does the IRS benefit from these immigrants run businesses?

Every few years, typically when immigration is a hot topic among political pundits, this question bubbles to the top and with it comes a plethora of answers, many incorrect. In short, no; there is no difference in taxes for immigrant business owners. This is at odds with an often-held belief that immigrant business owners receive some sort of five- or seven-year tax break. It is not at odds, however, with what we commonly have known to be true about the government and taxes – if you can pay taxes, they will collect them.

Immigrant Business Owners & Business Taxes

Legal immigrants, also known as “green-card holders,” “resident aliens” or “legal permanent residents” are all subject to the same exact tax laws as U.S. citizens. This includes governance that requires anyone earning a legal paycheck to pay income and Social Security taxes. It also means that any legal immigrant that opens a business is held accountable to typical local, state, and federal taxes.

As logic would further dictate, immigrant businesses owners are also held to the same laws that govern taxation based on business type. For example, if an immigrant business is a shareholder-owned corporation, then that business owner(s) will be required to pay corporate income taxes. If, on the other hand, the business is a small business registered as a limited liability company (LLC), sole proprietorship, or partnership, the tax rules change. In this case, both citizen and immigrant business owners are responsible for reporting their profits on their individual tax returns.

Another common question that follows a discussion about immigrant-run businesses is the protocol for businesses owners who are not considered residents living in the U.S. – in other words, non-resident aliens that own businesses within the U.S. Again, as with any other business, any income earned through a business run in the United States, regardless of where the business owner resides, will be subject to U.S. tax law.  

Resources for Immigrant Business Owners

If you’re an immigrant business owner and looking for information about local, state, and federal tax laws, there are numerous resources available to you, including the following:  

  • IRS.gov: One of the first places to begin your search should be the Internal Revenue Service website. Here you will find information about both personal and business tax requirements. However, if you are the owner of a small business or are self-employed, the Small Business and Self-Employed Tax Center will prove to be valuable.
  • State Department of Revenue: To find out if you are required to pay any state specific taxes, like sales tax or a gross receipts tax, check with the Department of Revenue in your state.
  • Local Government: In addition to federal and state taxes, you’ll likely need to pay local taxes, such as real estate taxes. These are typically determined and managed by the local governing agency, be it at the city, town, or county level.
  • Small Business Administration (SBA): The SBA is not designed specifically to manage tax concerns, but it does provide small business owners with a wealth of valuable information, including tax guidance.

Immigrant business owners are part of the rich tapestry that is small business America. And though the path to owning a business may vary, once an individual — citizen or legal resident — opens a business, they are expected to adhere to relevant business tax laws.  

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About the Author — Jennifer is a alum of the University of Denver. While in the graduate program there, she enjoyed spending time identifying ways in which non-profits and small businesses could develop into strong and profitable organizations that while promoting strong community growth. She also enjoys finding unique ways for freelancers and start-up businesses to reach and expand their goals.

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