Understanding U.S. Taxes for Newcomers and Remote Workers

The Key Answer

Working remotely from California for a European employer does not automatically mean the work falls outside the U.S. tax system. IRS rules on tax residence and where income is earned must be considered separately from immigration law. Most importantly, paying taxes on work does not make unauthorized employment legal.

What the Rules Mean

The IRS distinguishes resident aliens from nonresident aliens for tax purposes. The Substantial Presence Test generally requires at least 31 days in the current year and uses a weighted 183-day formula that considers the current and two preceding calendar years. For pay earned by providing personal services, where the work is physically performed is generally important—not just where the employer or its bank is located. Tax treaties and statutory exceptions may also matter.

An everyday practical step is not the same as legal authorization. Having a SIM card, U.S. address, membership in a community group, or tax registration does not confer employment authorization or permanent immigration status. Information about residency, income, identity, and legal status provided to agencies or companies must be truthful. A commercial offer does not override ESTA or Visa Waiver Program restrictions.

Step by Step

1. Record the actual days you were physically present in the United States during the current calendar year and previous two years. Under the Substantial Presence Test, current-year days generally count in full, days from the preceding year count as one-third, and days from the second preceding year count as one-sixth. Review statutory exceptions separately.

2. Determine whether you are a resident alien or nonresident alien for U.S. tax purposes. These are not the same as USCIS immigration categories. A person can be a U.S. tax resident without having authorization to perform a particular job.

3. Identify where services were actually performed, who paid for them, the countries in which income arose, and the contractual arrangement. A German company paying a German bank account does not automatically make work physically performed in California German-source income.

4. If you still have a home or tax obligations in Germany, Austria, or Switzerland, examine the relevant tax treaty and possible dual tax residence. Claiming treaty benefits can involve additional forms and rules that vary by case.

5. Discuss filing duties, sourcing, deductions, tax credits, and reporting requirements with an appropriately qualified tax professional. An SSN or ITIN is an identification matter and does not itself authorize employment.

6. Review remote work separately under immigration and employment law. ESTA does not authorize ordinary U.S. employment. A blanket online claim that remote work is always legal because the company is abroad is unreliable.

A Practical Example

Someone employed by a German company spends several months in California and works online every day. Receiving payment from Germany does not automatically mean the services are taxed solely as German-source income. They must also separately determine whether that activity is allowed under their actual U.S. immigration status.

Common Mistakes

– Treating a German bank account as proof that work generates foreign-source income. – Describing 183 days as the only rule for tax residence in every case. – Treating an ITIN as permission to work. – Concealing income because the work is performed online.

Frequently Asked Questions

Q: Does the United States only tax income from American employers? A: No. Tax residence and where services are performed can matter.

Q: Is 1099 work automatically allowed under ESTA? A: No. A tax form and work authorization are separate matters.

Q: Can a tax treaty help? A: Possibly, depending on the country, type of income, and individual circumstances.

Before buying or signing up, read all costs and terms. Prefer straightforward services that you can change later and avoid unnecessary long-term commitments. If language makes the terms difficult, request clear written confirmation. Keep contracts, provider details, and payment records in case documents are lost or a price changes unexpectedly. Libraries, local community resources, and public information portals can help you compare options.

Checklist

□ Days of presence recorded □ U.S. tax residence analyzed □ Place where work was performed recorded □ Relevant tax treaty considered □ U.S. and foreign income reviewed separately □ Immigration work authorization assessed independently

Official and Public Sources

• https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test • https://www.irs.gov/individuals/international-taxpayers/source-of-income-personal-service-income • https://www.irs.gov/publications/p519 • https://www.irs.gov/individuals/international-taxpayers/tax-treaty-tables