US permanent resident working as an independent contractor in Spain

Question

I am a permanent resident in the US. I've been offered a part-time job as an overseas software developer for a very small company in Spain. Their idea is that I'll give them invoices for the software I'd make, working from my home in the US. I don't have experience with taxes beyond being taxed as an employee in the US and my home country (not the US or Spain), and I wonder, is this even feasible and reasonable? I'm trying to find out if all the work setting everything up is worth the trouble.

I'd have to register myself as an independent contractor in the US, first thing. Can I then bill somebody overseas? Do I have to file US and Spain tax returns? (I guess I don't have to file a Spain tax return since I'm not a resident). Is there something else I need to consider?

Answer 1

My suggestion is to setup a business in the US. It can be very inexpensive, my wife and I created a company (LLC) and we are then taxed as a C-Corp. For you it may be enough to just set up as an LLC. Have your company invoice the Spanish company for your work. you then tax your income in the US. The added benefit is that you can let your business pay for a new computer and other business related expenses. Those expenses are deducted before you pay any taxes. Example: the company invoices and receives $20,000 in 2015. You buy a nice new computer that you need for $2,500, you buy office supplies for $500, perhaps a new desk and work chair for $1,000 and you need a fast internet connection at yoru home office ($60/months). That ends up leaving only $15,280 to pay taxes on. And I am sure you can find more business related expenses. :-)

Answer 2

To augment Karl-Henry's answer:

Can I then bill somebody overseas?

Yes, I'd look up some decent e-billing software.

Do I have to file US and Spain tax returns? (I guess I don't have to file a Spain tax return since I'm not a resident).

U.S., yes. Spain, no because of the reason you mention.