Remote tech work for international company

[taxmommy]

My son is a software developer for an international company that has no office but is based in Singapore.  Son works entirely from home, and is paid by invoicing the company.  No US or foreign taxes are withheld.  I think this means that he is a self-employed independent contractor, and needs to file schedule C.  Does the fact that it's an international company make any difference?

[AnnetteB6]

No, it does not make a difference as long as all of his work was performed in the US.  

Even though he is being paid by a foreign company but performs his work in the US, his income is considered to be US-source income and not foreign income.  

Since he is working as an independent contractor, his self-employed business income and expenses would be reported on Schedule C as you expected.  

[SierraRomeo]

Hello @AnnetteB6 

One related question: considering the same situation but in a case where the foreign country needs to withhold taxes? 

First thought was:

- report income as self employed (work in the US -> US income)

- report tax withheld in Foreign Taxes paid (General Category in 1116) 

(not entering the amount received again since it is not foreign income) 

- report US estimated taxes

Unfortunately, no compensation shows. Am I missing something? Or tax withheld for income in another country does not count to lower tax due in the US.

Thanks.

[ErnieS0]

You’ll steps are correct. You may not see your compensation on Form 1116 if you did not enter your income a second time in Foreign Taxes in Deductions & Credits.

 TurboTax does not carry over self-employment income the way it does dividends.

1. After you selected General category income on the screen “Choose the Income Type”
2. On “Country Summary” select Add a Country
3. On “Other Gross Income — (Your Country)" enter a description and amount in USD. 
4. Then enter your "Definitely Related Expenses" on the next screen. Click on the check box Show me all of my deductions.
5. Later, you'll add your foreign tax paid or withheld in USD.

@SierraRomeo 

[SierraRomeo]

Thanks @ErnieS0 ! 

I was avoiding entering the income again since there are several warnings about not entering any income more than once. 

Thanks again!

[ErnieS0]

Income entered in the Foreign Tax Credit section does not get carried over to any other place. It's only used to compute the allowed credit. 

IRS will only give you credit for the amount of U.S. tax you would pay on the foreign income amount. In most cases, the credit is better but sometimes, the deduction gives better results if you are being taxed by a country with an extremely high tax rate.