Social Security and other liabilities for foreign employers of US citizens working remotely

Question

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.

Fattie · Answer

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

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).

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,

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)

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.

Social Security and other liabilities for foreign employers of US citizens working remotely

One Answer

Add your own answers!

Ask a Question