So I started my software services LLC about 2 years ago in Delaware. It was registered, legit setup, everything proper. About 18 months ago my partner and I decided we wanted to travel while we worked so we both moved to Mexico. We figured since the company is Delaware registered and we're just working remotely, we were fine. We filed our federal returns, paid federal taxes, thought we were good.
Tonight I was doing some spring cleaning of old files and found an email from our accountant from like 8 months ago that I apparently never fully read. I pulled up the email again just now and started reading and I'm going to throw up. Apparently when you operate a US business, even if you're physically located outside the US, you may owe state taxes in any state where you have economic nexus or where your clients are located. We have clients in California, New York, Texas, Florida, and Illinois.
I immediately called my accountant , we apparently should have been filing and paying state taxes in all five of those states this whole time. We didn't do any of that. Not a single return. Not a single payment. He said in the best case scenario we're looking at maybe $15k-20k if we do a voluntary disclosure right now. But if the states audit us first without us coming forward, the penalties could be way worse.
I have no idea why I thought that. I should have asked more questions. Our accountant literally emailed me about this and I just… didn't read it properly. The worst part is my partner is going to absolutely lose it when I tell him tomorrow. We're splitting the bill on this nightmare and he's going to think I'm incompetent which… fair.
I'm trying to figure out if there's any way this doesn't completely tank our business or if we just have to bite the bullet and deal with it
LLC in mexico for 18 months and might owe back taxes to 5 states
byu/EveningPotential2790 intax
Posted by EveningPotential2790
2 Comments
Hmm … If you only have clients in those states, and no employees or places of business, I would question whether you actually have nexus there. Retail businesses are not considered to have nexus if goods are only delivered there by common carrier. I don’t know what kind of business you have, but I would ask more questions.
when i started my own setup i used doola to form the llc and they made sure i was set up for multiple states from day one including the ein and basic compliance stuff. it kept me from owing surprises later. might help you sort the back taxes part too.