Is foreign business income subject to self-employment tax?

For U.S. citizens, the income paid for services rendered to a foreign government or international organization is reportable as self-employment income on their U.S. federal income tax returns and is subject to self-employment tax to the extent such services are performed within the United States.

How do I report income from a foreign company?

You file Form 2555 with your personal return (Form 1040), claiming the FEIE and reporting your salary from a foreign employer. Because you earned less than $102,300, you will pay zero US tax on your income.

How do I report foreign business income?

Generally, you report your foreign income where you normally report your U.S. income on your tax return. Earned income (wages) is reported on line 7 of Form 1040; interest and dividend income is reported on Schedule B; income from rental properties is reported on Schedule E, etc.

Can a US company hire a foreign independent contractor?

Hiring a foreign independent contractor living outside of the US. The US company doesn’t need to report the payments they made to the foreign independent contractor to the IRS if they are not US-sourced income. The company also doesn’t need to withhold any tax.

Can a US company pay a foreign employee?

There are no legal prohibitions in the US against hiring remote workers abroad, so the focus needs to be on compliance in the foreign country.

Can a US company withhold taxes from a foreign contractor?

As a result, a US company is not obligated to withhold or report taxes if the contractor does all his work outside of the US. If a foreign contractor performs any part of his service in the US, certain conditions should be met to avoid tax obligations. 4. Which of the following cases applies to your ‘hiring independent contractor’ situation?

Do you need backup withholding for foreign independent contractors?

Like we already mentioned, there is no obligation for backup withholding for your foreign independent contractors, like you need to do with your employees. Even without tax withholding, tax reporting is still necessary if the income foreign contracts made is US-sourced.

Can an employer require an independent contractor to pay taxes?

If the employer is controlling the whole work process, the independent contractor might be considered an employee, hence requiring the employer to pay employment benefits (Social Security, health insurance, pension plan, unemployment, etc.) through do tax withholding. All of these regulations can be even stricter, under the local law.

How much tax do I have to withhold on foreign nationals?

If the foreign national lives in the US and performs the service in the US, the company must withhold tax at the rate of 30\% before compensation is made to the contractor. However, there are two exceptions to this rule.