If I work in the US, but work online for a foreign company as an independent teacher, where do I file the income under?

[CharlesWi · Accepted solution]

Employees working for a foreign government or an international organization in the U.S. are subject to some special tax rules. The tax treatment of their compensation can vary according to whether the employee is a U.S. citizen, a dual citizen, a green cardholder (lawful permanent resident), or a foreign citizen without a green card.

If you are a U.S. citizen working in the U.S., you must report self-employment income under the Self-Employment Contributions Act (SECA). Self-employment tax is computed on Schedule SE, Self-Employment Tax, and reported on page 2 of the Form 1040.

U.S. citizens working in the U.S. must pay self-employment tax because the foreign government or organization is not liable for the employer’s portion of the contribution to the U.S. system. However, you are not “self-employed” for any other federal tax purposes. You may not claim deductions for expenses on Schedule C and are not qualified to establish a Simplified Employee Pension (SEP) Plan and there is no allowable deduction on line 28 of Form 1040 for contributions to any such plan. Rules of contributing to SEP/IRA plans are explained in IRS Publication 560, Retirement Plans for Small Business, and Revenue Ruling 73-384 for additional information.

You may also claim deductions for unreimbursed employee business expenses arising from your employment on Form 2106, Employee Business Expenses. The deduction is claimed on line 21 of Schedule A, Itemized Deductions, on the Form 1040. These expenses are miscellaneous itemized deductions subject to the 2 percent of adjusted gross income limitation.

To jump directly to any section in your TurboTax program, just go up to the TurboTax Search Bar (it may say "ask a question") and type in what you are looking for (i.e. self-employment tax), then press your enter key.  A drop-down list will appear with various links to documentation on the subject, but most important, first on the list it will say "Jump Directly to (your subject)"  select that and you will be taken to that section in the TurboTax interview process.

[tttofilon]

Thank you! Perfect answer.

[suzerthebruiser]

I have the same situation my foreign client does not have an EIN that I can report.  What should I do leave it blank?

[Critter1]

"my foreign client"  --- Turbo Tax is not licensed for paid tax preparers

If you are not a preparer then open your own post instead of tacking onto a 7 month old post. You will get more answers that way. And provide more details.

[private2]

thanks - but your answer ONLY relates to working for a foreign government or international organization. What about working for a simple foreign company?
I'm pretty sure the income has to be reported in Schedule C as Self Employment Income, but would still love confirmation.