Hi,

I tried this question on the Tax part of EF, and got lots of views but no responses, so maybe this area will be more fruitful.

I'm a US citizen, resident in Switzerland on a B permit thanks to my husband's job. I work independently for Swiss clients and get paid here in CHFs. I am also currently doing some work remotely for a friend in the US. She says that she needs to file a W-2 with the IRS for me if she pays me more than $600, and I will most likely go over that amount.

I think I'd prefer to have this income from working remotely considered as Swiss income rather than US income - from the threads I've read here the Swiss will think I should declare it here - but I don't want to have to pay both AVS/Social Security, and I don't want this income to interfere with our Foreign Earned Income exemption.

Has anyone else dealt with this situation, and what did you learn? Should I just cap my remote income at $599 and then declare it here? Does it make a difference where the remote income first gets deposited in a bank?

If I was in India and someone in the US was outsourcing to me, would they still have to file a W-2?

Thanks!

Oops, that should have been a 1099. My US employer thinks she'll need to file a 1099 with the IRS if I go over $600 in income.

If any of you work for a company in the US but from CH, do you get a 1099?

Thanks again.

IIRC, I had to fill out a W2. But they don't take out any money from me. I send them the invoice and they send me the exact amount. It's up to me to work out and make relevant payments.

Thanks, miniMia! So are you getting taxed on the US earnings both here and in the US?

I might be oversimplyfying things here but...I think it won't matter much either way. You have to file taxes in both places and declare your income. I don't think $600 is going to drastically swing the tax burden (or credits) one way or another.

True, but I'm being offered more work than the $600 so I want to be sure that I'll actually end up clearing some extra as a result.

I can't offer any advice on your particular situation with regards to the business taxes and how your tax situation would be, but I can tell you that per my accountant's advice I need to declare my 1099's on the CH return. Tax deferred accounts that issue a 5468 do not need to be reported.

I should have just done this in the first place, but I didn't think I could get a straight answer from the IRS. I called their help line, eventually explained my situation to an operator, who then routed me to the "Advanced Individual Situation" help center. The man I spoke to there asked me the nature of the work I am doing and said that it was clear that the income is being earned in Switzerland. He referred me to Publication 54, p. 16, Source of Earned Income.

This section uses the example of pay for work done in Austria is income from a foreign source even if the pay is deposited directly into your account in the US and your employer is located in New York.

Yay! And thanks to those who tried to help figure this one out.

No. I add my income to our Swiss tax return. I don't make enough to be taxed in the US.

Would the IRS actually waste their time with a couple of hundred dollars?
Let them figure it out.

You still have to file a US tax return which you probably know. Any days you work in the USA physically that income should be reported as US income, the stuff you earn while here is Swiss income. The Foreign Earned Income Exclusion (FEIE) would then be reduced slightly if you work a handful of days in the US.

If you are well under the FEIE in total the US taxes are not an issue.