If you live in the United States and work remotely for a company based abroad, the IRS treats your pay as U.S. income and taxes it accordingly, no matter where the company sits or which bank sends the money.1Internal Revenue Service. Source of Income – Personal Service Income What you actually owe, and what you have to file on top of your return, depends on one thing: how the foreign company is paying you. That split drives everything below.
Three Ways a Foreign Company Can Pay You
Before you can figure out your tax bill, pin down which of these describes your arrangement. The paperwork, the withholding, and the deadlines all follow from it.
The first setup is a direct independent contractor relationship. You invoice the foreign company, it pays you, and you handle every tax filing yourself. This is the most common structure when the company has no U.S. presence.
The second is an Employer of Record (EOR). The EOR is a U.S. company that becomes your legal employer on paper. It runs payroll, withholds your taxes, issues your W-2, and handles federal and state labor compliance. You do the work for the foreign company, but your paycheck comes from the EOR.
The third is a U.S. subsidiary of the foreign company. The subsidiary hires you directly as a domestic employer, and from your side the job looks like any other W-2 position with an American company.
If you’re on a W-2 (either an EOR or a subsidiary), skip to the employee section. If you’re invoicing the foreign company directly, the next section is yours.
If You’re a Contractor: Self-Employment Tax and Quarterly Payments
Contracting directly with a foreign company makes you self-employed in the eyes of the IRS. Nobody is withholding anything, so the full tax burden falls on you to calculate, set aside, and pay on a schedule.
Self-Employment Tax
You owe both the employer and employee shares of Social Security and Medicare under the Self-Employment Contributions Act. The combined rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.2Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only to the first $184,500 of net earnings in 2026.3Social Security Administration. Contribution and Benefit Base Medicare has no cap.
If your net self-employment income exceeds $200,000 (or $250,000 filing jointly), add the 0.9% Additional Medicare Tax on the amount above the threshold.4Internal Revenue Service. Topic No. 560, Additional Medicare Tax You calculate the whole thing on Schedule SE and attach it to your Form 1040.
On top of self-employment tax, you still owe regular federal income tax on your net earnings at the usual graduated rates.
Quarterly Estimated Payments
Because no one is withholding, you have to send the IRS estimated tax payments through the year using Form 1040-ES.5Internal Revenue Service. Estimated Taxes For a calendar-year 2026 filer, the payments are due April 15, June 15, and September 15 of 2026, and January 15 of 2027.6Internal Revenue Service. Publication 509 (2026), Tax Calendars Missing a deadline or underpaying triggers penalties and interest.
Two Deductions That Help
Self-employment tax stings, but two deductions take the edge off.
You can deduct half of your self-employment tax when calculating your adjusted gross income. It goes on Schedule 1 of your 1040 and reduces your taxable income directly, with no need to itemize.7Internal Revenue Service. Topic No. 554, Self-Employment Tax
You may also qualify for the Qualified Business Income (QBI) deduction under Section 199A, which lets eligible self-employed people deduct up to 20% of qualified business income. The One Big Beautiful Bill Act, signed July 4, 2025, extended and modified the deduction for tax years beginning in 2026.8Internal Revenue Service. One, Big, Beautiful Bill Provisions The deduction begins phasing out above roughly $201,750 of taxable income for single filers and roughly $403,500 for joint filers. Service businesses such as law, accounting, consulting, and financial services face stricter limits above those thresholds; architecture and engineering are exempt from those restrictions.
You Probably Will Not Get a 1099
A foreign company with no U.S. tax presence generally has no obligation to file U.S. information returns like Form 1099-NEC. You may never receive a 1099 for any of this income. That changes nothing about your filing duties. You report every dollar of self-employment income on Schedule C whether the payer sends tax forms or not. Keep your own clean records: invoices, bank statements, contracts, and anything else that documents what came in and when.
If You’re an Employee Through an EOR or Subsidiary
If an EOR or a U.S. subsidiary is cutting your paycheck, your tax life looks like any other W-2 job. The employer withholds federal income tax plus your share of FICA: 6.2% for Social Security and 1.45% for Medicare, with the employer matching both.9Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates If your wages top $200,000, your employer also withholds the 0.9% Additional Medicare Tax on the excess.4Internal Revenue Service. Topic No. 560, Additional Medicare Tax You get a W-2 in January and file your 1040 the normal way.
One thing to notice in an EOR setup: the EOR, not the foreign company, is listed as your employer on your W-2 and for federal and state labor law purposes. That matters if you ever need to file an unemployment claim or a workplace complaint.
Reporting Your Foreign Bank Account
If any of your pay lands in a foreign bank account, two separate reporting rules kick in. The penalties for missing them are brutal compared to the effort of filing, and people in cross-border work arrangements miss them constantly.
FBAR (FinCEN Form 114)
If the combined value of all your foreign financial accounts crosses $10,000 at any point during the calendar year, you have to file a Report of Foreign Bank and Financial Accounts with the Financial Crimes Enforcement Network.10Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts The threshold is the aggregate across every foreign account you own or control, not per account. A single day above $10,000 triggers the filing for the whole year.
FBAR is due April 15 with an automatic extension to October 15 that requires no separate request.11Financial Crimes Enforcement Network. Due Date for FBARs You file it electronically through FinCEN’s BSA E-Filing System, separately from your tax return. Non-willful failures can draw penalties up to $10,000 per violation. Willful violations can reach the greater of $100,000 or 50% of the account balance at the time of the violation.12Office of the Law Revision Counsel. 31 U.S. Code 5321 – Civil Penalties
FATCA (Form 8938)
Form 8938 is a separate filing that goes with your tax return. If you live in the U.S. and file as single, you have to file it when your foreign financial assets exceed $50,000 on the last day of the year or $75,000 at any point during the year. For joint filers, those thresholds are $100,000 and $150,000.13Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
Missing Form 8938 is a $10,000 penalty, with up to $50,000 more for continued non-compliance after the IRS notifies you. If undisclosed foreign assets are tied to an underpayment of tax, that underpayment gets hit with a 40% accuracy-related penalty on top.14Internal Revenue Service. FATCA Information for Individuals FBAR and Form 8938 have different thresholds and different destinations. Filing one does not substitute for the other.
Social Security: Avoiding Double Contributions
If the foreign company’s home country also collects social security taxes, you could face double contributions. The United States has totalization agreements with 30 countries to prevent that.15Social Security Administration. International Programs – US International SSA Agreements
The baseline rule in most of these agreements is territorial: you pay into the social security system of the country where you physically work. Sitting in the U.S. means you pay into U.S. Social Security and are exempt from the foreign country’s equivalent.15Social Security Administration. International Programs – US International SSA Agreements A narrow exception applies to detached workers temporarily sent abroad by their employer, who may stay in their home system for a limited period.
The countries with active agreements are Australia, Austria, Belgium, Brazil, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, South Korea, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and Uruguay.16Social Security Administration. Country List 3 – International Programs If your employer is based somewhere not on this list, talk to a cross-border tax professional about potential dual contributions.
To document the exemption to the foreign country, you can request a Certificate of Coverage from the Social Security Administration through its online portal.17Social Security Administration. Certificate of Coverage
State Income Tax
You owe income tax to the state where you physically do the work. If you live in a state with an income tax, you file a state return and pay on your earnings the same way any other resident would. Your employer being overseas does not create an exception. If you move mid-year or split time across states, you may owe tax to more than one and should check each state’s residency and sourcing rules.
Why the Foreign Earned Income Exclusion Does Not Apply
People working for foreign companies often ask about the Foreign Earned Income Exclusion. It does not help here. The exclusion requires your tax home to be in a foreign country and that you be physically present outside the United States for at least 330 full days in a 12-month period.18Internal Revenue Service. Foreign Earned Income Exclusion Living and working in the U.S. fails both tests. Where your employer is based is irrelevant; what counts is where you sit when you do the work.
You Still Need Work Authorization
Doing paid work while physically in the United States requires legal work authorization regardless of where the employer is located, and regardless of which country the money comes from. You need to be a U.S. citizen, a lawful permanent resident, or hold a valid Employment Authorization Document issued by U.S. Citizenship and Immigration Services.19U.S. Citizenship and Immigration Services. 13.0 Acceptable Documents for Verifying Employment Authorization and Identity
A foreign company with no U.S. entity cannot sponsor an H-1B or similar employment-based visa, because sponsorship requires a U.S. employer to file the petition. If you do not already have work authorization through citizenship, permanent residency, or an EAD obtained some other way (such as through a qualifying spouse’s visa or OPT), a foreign company without a U.S. presence cannot get it for you. That authorization has to be in place before the work begins.