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I have the following situation: I am a US citizen employed (or about to be employed, depending whom you ask) outside the US in a country that is currently under lockdown. I've asked permission to work remotely given the circumstances and am told that HR will not approve this request until they know whether they will bear tax liability to the US IRS (in connection with Social Security, etc.) owing to my working from within the US.

Their request then was that I should consult an accountant and inform them of the results; but, unsurprisingly, my accountant is mostly aware of the nuances of state taxes and has no opinion on the matter occupying me.

My own guess would be that as they are a foreign enterprise, the US revenue service has no hold over them, but they didn't ask for my guess.

Where could I find some guidance on this topic? I have so far not had luck with the IRS website, although this of course does not mean it isn't addressed somewhere. The closest I have found (https://www.irs.gov/individuals/international-taxpayers/persons-employed-by-a-foreign-employer) tells me I will pay Social Security and Medicare tax this year, but doesn't offer any information on what liability the employer in my situation bears.

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    Purely anecdotal (having worked remotely for a foreign employer), there's no US liability on their part. They pay you, deducting taxes & Social Security equivalents according to their laws. You file a tax return in the foreign country,, then declare the foreign income on your US return, taking a deduction for foreign tax paid. If the country has a tax treaty with the US, the SS-equivalent will get transferred to US-SS behind the scenes.
    – jamesqf
    Commented Nov 12, 2020 at 17:07
  • Exactly as JamesQF says. However: the other alternative is they trivially pay you gross and you trivially file taxes in the US.
    – Fattie
    Commented Nov 12, 2020 at 17:34
  • @Fattie It may not be at all trivial for them to pay you gross, because their local laws may prohibit it.
    – Mike Scott
    Commented Nov 13, 2020 at 11:21
  • hi @MikeScott - absolutely true, the OP should state the country in question. But in the vast majority of countries, that is perfectly acceptable.
    – Fattie
    Commented Nov 13, 2020 at 11:25
  • @MikeScott: I don't know if the question deserves the bump that editing would give it, but the country in question is the UK, if that information helps.
    – jdc
    Commented Nov 13, 2020 at 16:50

1 Answer 1

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Say you are in "Denver" and they are in "France".

  1. They pay you completely, utterly normally "As if you are a French person". You then square everything with the IRS at the end of each year. (Not trivial, BTW).

  2. You send them a gross invoice (perhaps, each month) and they send you that much money. Note that this is utterly identical to the 10,000 other suppliers they have in China, US, Germany, Canada, Australia, Japan etc. That's all they do - end of story.

In (2) at the end of each tax year in the US, when you use taxact.com you have to click the 'self-employed' button.

Points:

  • #2 is overwhelmingly more common and normal.

  • Unfortunately, if they are a small business (1-5 people) in France and they have never done either 1 or 2 before, I have unfortunate realistic news: very likely it just won't work out and won't be possible.

How do you proceed from here?

Your best bet would be to have them to do "2". What about this language,

Bonjour, the usual system to make it easier on a company is I will simply give you a supplier invoice for €18,000 each calendar month, we will understand that you will send a wire within 3 business days. I will entirely take care of tax payments to the IRS, and you do nothing. Cordialement, JDC.

Good luck.

It's now explained that this is a university (not a small business, nor a corp).

Unfortunately,

  1. Path "1" above is very, very hard for them. There's a lot of fuss and paperwork and angst in doing that (unless they are say a software company that commonly does it you know?) I fear you should be prepared they will basically say "it can't be done" (even though it can be done, with difficulty)

  2. Path "2" above is on the face of it, and factually, easy for them, BUT, as you say in the comments, it's possible they will find it "irregular" and won't do it. (Again, it's not a software company that does this all day every day.)

My guess is you're "more likely" to have them "change their systems" to do 2 than 1. But .. good luck.

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  • Thank you for this. Why you say I need to have them do #2? It doesn't appear there is any additional liability on their end for #1 either. The company in question in this instance is a university and is already a signed contract and a standard procedure for foreign hires in this position category (which does, however, involve their living there), and it seems likely to me that they will find the notion of treating me as a contractor unacceptably unofficial.
    – jdc
    Commented Nov 13, 2020 at 6:26
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    jdc, I meant *what would be best and most advantageous for you...". I edited in some more info ..
    – Fattie
    Commented Nov 13, 2020 at 11:14
  • I have another clarification to ask. You've clarified in your post that #1 is very onerous on their end, but also approved jamesqf's comment on the original post, which I'd initially read as suggesting they wouldn't have to do anything, so I think I must be misreading one of you. What am I missing?
    – jdc
    Commented Nov 13, 2020 at 16:55
  • Allow me to try to explain, the >>> CAN <<< do that. For many companies, they would say "Sure we do that all the time, whatever, let's begin." BUT. If they have never done that before, it's a huge chore for them. Regarding your specific situation, I guess that unfortunately that is the case. Does it make sense?
    – Fattie
    Commented Nov 13, 2020 at 18:52
  • regarding the SECOND option. they need actually do NOTHING to achieve that. >>>> BUT <<<< again it is a big leap to "authorize" it. And yet again, very unfortunately, I bet they will struggle "authorizing" that approach.
    – Fattie
    Commented Nov 13, 2020 at 18:52

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