Can You Work for an American Company While Living Abroad?

Yes, a US citizen or green card holder can work for a US company while living abroad, but the move creates overlapping legal and tax obligations in both countries that you have to plan for before your first day overseas. How your employer classifies you, where you become a tax resident, and whether your host country lets you work there all shift the moment you leave the United States. Getting any one of those wrong can mean double taxation, immigration trouble, or steep penalties.

How Your Classification Changes the Setup

The first fork in the road is whether the American company keeps you as a W-2 employee, converts you to a 1099 independent contractor, or hires you through a third party in your new country. Each path has different consequences for you.

Many companies push workers toward the contractor route because it lets them avoid registering as an employer in a foreign country. As a 1099 contractor, you handle your own taxes and benefits, and the company avoids creating a “permanent establishment” abroad that could subject it to that country’s corporate taxes and labor rules. The tradeoff for you: US labor protections generally do not follow you overseas. The Fair Labor Standards Act, which sets minimum wage and overtime rules, does not cover employees working in a foreign country even when the employer’s main office is in the United States.1U.S. Department of Labor. elaws – Fair Labor Standards Act Advisor Your service agreement, including its dispute resolution clause and choice-of-law provision, is what governs the relationship.

Staying on as a W-2 employee is harder for the company. It typically has to register a legal entity or branch in the foreign country to run payroll and pay local social insurance contributions. Skipping that step exposes the company to misclassification penalties from the IRS and from the host government.

To thread this needle, many companies use an employer of record (EOR). An EOR is a third-party organization that becomes your legal employer in the foreign country. It writes a locally compliant employment contract, runs payroll, withholds the correct local taxes, and administers the benefits that country requires, while you still report to the American company for day-to-day work. This structure lets you keep employee-level benefits like health coverage and retirement contributions without forcing the American firm to open its own foreign office.

US Taxes You Still Owe

The United States taxes its citizens and green card holders on worldwide income no matter where they live or where the money is paid.2Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad Even if every dollar you earn lands in a foreign bank account, you still file a federal return every year. If your return is more than 60 days late, the minimum penalty is $525 or 100% of the tax owed, whichever is less.3Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges Large unpaid balances can also put your passport at risk: the IRS can certify seriously delinquent tax debt to the State Department, which may then revoke or deny it.4Internal Revenue Service. Revocation or Denial of Passport in Cases of Certain Unpaid Taxes

Two mechanisms in the tax code exist to keep you from paying US and foreign tax on the same dollars.

Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) lets qualifying workers exclude a portion of their foreign earnings from US federal income tax. For the 2026 tax year, you can exclude up to $132,900.5Internal Revenue Service. Figuring the Foreign Earned Income Exclusion To qualify, you must pass one of two tests:

  • Bona fide residence test: you are a US citizen who has been a genuine resident of a foreign country for an uninterrupted period that includes an entire tax year.
  • Physical presence test: you are physically present in a foreign country for at least 330 full days during any 12-month period.6Office of the Law Revision Counsel. 26 USC 911 – Citizens or Residents of the United States Living Abroad

Anything you earn above the exclusion is taxed at normal US brackets, which top out at 37%.7Internal Revenue Service. Federal Income Tax Rates and Brackets You claim the FEIE by attaching Form 2555 to your Form 1040.8Internal Revenue Service. Foreign Earned Income Exclusion – Forms To File

If you qualify for the FEIE, you may also exclude or deduct certain housing costs — rent, utilities, property insurance — that exceed a base amount set by the IRS. The maximum housing amount for 2026 is $39,870, with higher limits in especially expensive cities.5Internal Revenue Service. Figuring the Foreign Earned Income Exclusion

Foreign Tax Credit

The Foreign Tax Credit (FTC) is the alternative. Instead of excluding foreign income, you claim a dollar-for-dollar credit against your US tax bill for income taxes you paid to a foreign government. This tends to work best when you live in a country whose tax rate is higher than the US rate, because the credit can wipe out your entire US liability on that income. You claim it on Form 1116.9Internal Revenue Service. Instructions for Form 1116 You cannot double-dip: income you excluded on Form 2555 cannot also generate a foreign tax credit.10Internal Revenue Service. Instructions for Form 2555

Social Security, Medicare, and Totalization

FICA — Social Security and Medicare taxes — has its own rules abroad. As a W-2 employee of a US company, your employer withholds 6.2% for Social Security and 1.45% for Medicare and matches those amounts, for a combined 15.3% split between you and the company.11Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates The Social Security portion applies only to wages up to $184,500 in 2026.12Social Security Administration. Contribution and Benefit Base

Self-employed contractors owe the full 15.3% themselves, calculated on Schedule SE.13Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) Left alone, this can force you to pay into two countries’ social insurance systems at once.

Totalization Agreements are the fix. These bilateral treaties assign you to one country’s system so you’re not double-covered. The US currently has agreements with 30 countries, including Australia, Canada, France, Germany, Japan, South Korea, and the United Kingdom.14Social Security Administration. U.S. International Social Security Agreements If your host country has an agreement in force, you can request a certificate of coverage from that country’s social security agency showing you’re exempt from US self-employment tax. Keep it on file; the IRS may ask for it.

Reporting Foreign Bank Accounts and Assets

Opening a foreign bank account is almost inevitable when you move, and it triggers two separate reporting obligations that many people miss.

FBAR

If the combined value of all your foreign financial accounts exceeds $10,000 at any point during the year, you must file a Report of Foreign Bank and Financial Accounts (FBAR) with the Financial Crimes Enforcement Network.15Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts The FBAR is filed electronically through the BSA E-Filing System and is separate from your tax return. The deadline is April 15, with an automatic extension to October 15.16Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) Penalties for non-willful failure to file can reach over $16,000 per account per year, and willful violations carry far steeper consequences, including potential criminal charges.

FATCA (Form 8938)

The Foreign Account Tax Compliance Act requires you to report specified foreign financial assets — bank accounts, investment accounts, interests in foreign entities — on Form 8938, filed with your tax return. Thresholds for taxpayers living abroad are higher than for those in the US:

  • Single or married filing separately: file if assets exceed $200,000 on the last day of the tax year or $300,000 at any point during the year.
  • Married filing jointly: file if assets exceed $400,000 on the last day of the tax year or $600,000 at any point during the year.17Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers

FBAR and Form 8938 are not interchangeable. If you meet both thresholds, you file both. They cover overlapping but not identical categories of assets.

State Tax Residency

Federal isn’t the whole picture. If you were a resident of a state with an income tax before leaving, that state may still consider you a tax resident and expect returns. Nine states have no income tax on wages, which simplifies matters if that was your last state of residence. Others, particularly those with strict domicile rules, keep taxing you until you can show you’ve permanently severed ties. Factors states look at include whether you still own property there, hold a state driver’s license, are registered to vote, or keep a mailing address in the state.

Rules for establishing non-residency vary. Some states accept that moving abroad ends residency once you’re gone for a full tax year; others presume you remain a resident unless you can document a new permanent home elsewhere. Formally changing your domicile by updating voter registration, surrendering your state driver’s license, and closing local financial accounts strengthens your position. If your last state has a reputation for aggressive residency enforcement, talk to a tax professional before assuming you’re done filing there.

What Your Host Country Requires

Whatever you sort out on the US side, the country you move to has its own rules, and they apply regardless of your US status.

Visa and Work Authorization

Most countries require foreign nationals to hold a visa that specifically permits work or professional activity. Doing paid work on a standard tourist visa is a violation of immigration law in most places and can lead to deportation, fines, or a ban on future entry. A growing number of countries now offer digital nomad visas built for remote workers earning income from abroad, each with its own income requirements and fees.

Foreign Tax Residency

Most countries treat you as a tax resident once you’ve spent more than 183 days there in a calendar year, though thresholds and criteria vary. Once you’re a tax resident, the host country generally claims the right to tax your worldwide income, not just what you earn locally. Local rates can be substantial, with some European and South American nations reaching top marginal rates above 45%. Becoming a tax resident usually means registering for a local tax identification number and filing local returns.

Local Labor Law

Foreign labor laws can override what your American employment contract says. Even when your contract specifies that US law governs, many countries require that work performed on their soil meet local standards for paid leave, public holidays, and parental benefits. If a country mandates 30 days of annual leave, an employer of record or locally registered employer has to honor it regardless of US norms. Termination rules differ too; many countries require advance notice or severance payments that don’t exist in typical American at-will employment.

Consequences of Getting It Wrong

Ignoring host-country obligations has consequences for you and the American company. Foreign governments can freeze local bank accounts over unpaid social insurance contributions or income tax. Working without proper authorization can carry criminal penalties in some places, including fines or short-term imprisonment. Keeping clean records of your residency dates, visa status, and work activities helps you during inspections or visa renewals.

Health Coverage: Medicare Doesn’t Travel

Medicare generally does not pay for health care or supplies you receive outside the United States, apart from a few narrow emergency exceptions.18Medicare.gov. Medicare Coverage Outside the United States Medicare plans also cannot cover prescription drugs bought abroad. Even if you stay enrolled and keep paying premiums, you need separate coverage in your host country.

Options include enrolling in the host country’s public health system (if your visa qualifies you), buying a local private policy, or purchasing international private medical insurance (IPMI) built for expatriates. IPMI policies cover multiple countries but can be expensive, with premiums driven primarily by age and country of residence. Some employer of record arrangements include local health insurance, so check the benefits package before buying your own.

Documents to Have Before You Start

Before your first paycheck, expect to provide several things to the American company and, in some cases, to your host country’s tax authority.

  • US tax identification: a Social Security Number or Individual Taxpayer Identification Number is required to receive payments from a US company and report income to the IRS.
  • Form W-9 or W-8BEN: US persons submit Form W-9 to certify their taxpayer status. Foreign nationals who are not US persons submit Form W-8BEN to claim any treaty benefits and establish that they aren’t subject to standard US backup withholding.19Internal Revenue Service. Instructions for the Requester of Form W-920Internal Revenue Service. Instructions for Form W-8BEN
  • Proof of foreign address: employers often need a lease, utility bill, or similar document to confirm where you’re working from, which helps them assess whether they’ve created a tax presence in your host country.
  • Banking details: international payments require your bank’s SWIFT or BIC code, your International Bank Account Number (IBAN), and the account currency. Small errors delay payments and trigger bank fees. Some employers use fintech platforms that handle currency conversion automatically.

Filing Your US Return From Abroad

US citizens and resident aliens living abroad get an automatic two-month extension, pushing the filing deadline to June 15. You don’t have to request it; it applies automatically if your main home is outside the United States on the regular April 15 due date.21Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad – Automatic 2-Month Extension of Time To File Interest on any tax owed still accrues from April 15, so the extension delays the paperwork, not the payment.22Internal Revenue Service. IRS Reminder to U.S. Taxpayers Living, Working Abroad: File 2024 Tax Return by June 16

W-2 employees get a Form W-2 from the employer by January 31. Independent contractors should expect a Form 1099-NEC if they earned $2,000 or more from a single payer during 2026, a threshold that increased from $600 for payments made after December 31, 2025.23Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide

When you file Form 1040, attach the additional forms your situation requires:

If a Totalization Agreement covers you and exempts you from US self-employment tax, request a certificate of coverage from the host country’s social security agency. Self-employed workers attach a copy to their US return as proof of the exemption.14Social Security Administration. U.S. International Social Security Agreements IRS e-file and authorized tax software accept returns with foreign addresses, though some platforms handle international filings more smoothly than others. Because expat returns often involve multiple specialized forms, many workers abroad use a tax professional who handles international filings routinely.