U.S. Tax Withholding on Effectively Connected Income allocable to Foreign Partners
Yes, however if the Nevada LLC is actively conducting business in the U.S and has foreign members (partners for I.R.S. purposes), the Nevada LLC will be required to become a "Withholding Agent" for the I.R.S. when distributions are made. The Withholding Agent (the Nevada LLC) must withhold a portion of any distribution made to a non U.S. member and forward this payment directly to the I.R.S.
N.B: If the Nevada LLC's activities are OUTSIDE of the U.S. please review this FAQ:
Withholding Rates:
Under Section 1446 A U.S. partnership with foreign partners generally must pay a withholding tax on partnership taxable income allocable to the foreign partners. The withholding tax rate is equal to the highest rate of tax specified in section 1 [with respect to non-corporate foreign partners] and section 11(b)(1) [with respect to corporate foreign partners]. The highest rate listed in both of these sections is currently 35%. However, the partnership can generally choose to pay using the highest applicable tax rate for certain preferential items allocated to non-corporate partners, such as capital gains (currently 15%), collectible gains (currently 28%), and un-recaptured section 1250 gain (currently 25%). Generally if a tax treaty exists between the U.S. and the partner's home country, then the partner would receive a "credit" for any U.S. tax paid in his home country.
Partnership Forms to be Filed:
The partnership must make quarterly estimated payments on Form 8813, Partnership Withholding Tax Payment Voucher (Section 1446). After the close of the partnership’s taxable year, the partnership must pay any additional section 1446 taxes due when it files Form 8804, Annual Return for Partnership Withholding Tax (Section 1446). The partnership must also provide Form 8805, Foreign Partner’s Information Statement of Section 1446 Withholding Tax, to each foreign partner.
Partner Forms to be Filed:
Nonresident alien individuals should file Form 1040NR, U.S. Nonresident Alien Income Tax Return to claim any refund they may be due under a tax treaty. Foreign corporations should file Form 1120F, U.S. Income Tax Return of a Foreign Corporation to claim any refund that may be due under a tax treaty.