How to Report Foreign Income Without a W-2

U.S. citizens and resident aliens must report their worldwide income to the Internal Revenue Service (IRS), even if it is earned abroad and no W-2 is issued. This process requires gathering specific documents, converting foreign currency, and correctly entering the information on your U.S. tax return.

## Gathering Your Foreign Income Information

Since a foreign employer is not subject to U.S. law, they will not issue a Form W-2. Instead, you must collect equivalent documents to substantiate your earnings. These can include:

• Foreign pay slips
• A detailed employment contract that specifies your salary
• Invoices if you are an independent contractor
• Bank statements showing direct deposits of your wages

All financial figures reported to the IRS must be in U.S. dollars, so you must translate any income received in a foreign currency. You can use the exchange rate on the day you received the payment or a yearly average exchange rate for income received regularly. You must apply your chosen method consistently for the entire tax year.

You must also document your time spent outside the United States to prove eligibility for certain tax benefits. Create a detailed log of your travel days using passport stamps, flight itineraries, and personal calendars, as this record is required for specific exclusions.

## Reporting Income on Your U.S. Tax Return

For employees of a foreign company, the total converted U.S. dollar amount of your foreign wages is reported on the same line as U.S. wages on Form 1040. You do not need to file Form 4852, a substitute for a missing W-2, because your foreign employer was never required to issue one.

The reporting method differs for self-employed individuals or independent contractors. This income must be reported on Schedule C, Profit or Loss from Business. You will list your gross foreign income and subtract any allowable business expenses. The resulting net profit is transferred to your Form 1040 and used to calculate self-employment taxes on Schedule SE.

## Claiming Foreign Tax Benefits

To prevent double taxation, the U.S. tax code offers ways to reduce your tax liability on income already taxed by another country. The Foreign Earned Income Exclusion (FEIE) allows you to remove a portion of your foreign earned income from U.S. taxation. The excludable amount is adjusted annually for inflation and is capped at $130,000 for the 2025 tax year.

To claim the FEIE, you must file Form 2555, have a tax home in a foreign country, and satisfy either the Bona Fide Residence Test or the Physical Presence Test. The Bona Fide Residence Test requires you to be a resident of a foreign country for an entire tax year. The Physical Presence Test requires you to be physically present in a foreign country for at least 330 full days during any 12-month period.

An alternative is the Foreign Tax Credit (FTC), calculated using Form 1116. This credit provides a dollar-for-dollar reduction of your U.S. income tax for taxes paid to a foreign government and can be advantageous if you paid foreign taxes at a rate higher than your U.S. rate. You cannot claim both the FEIE and the FTC on the same income, so an analysis is needed to determine which provides the greater benefit.

## Filing Required Foreign Account Disclosures

You may have additional filing obligations for your foreign financial assets. These are informational returns that do not result in a direct tax but carry significant penalties if not filed. The requirement to file is based on the value of your foreign assets, not the income they generate, and is separate from your income tax reporting.

One common disclosure is the Report of Foreign Bank and Financial Accounts (FBAR), or FinCEN Form 114. This form is required if the total value of all your foreign financial accounts exceeds $10,000 at any point during the calendar year. The FBAR is not filed with your tax return; it must be submitted electronically through the Financial Crimes Enforcement Network’s (FinCEN) BSA E-Filing System.

A separate requirement is the Statement of Specified Foreign Financial Assets, Form 8938, which is filed with your Form 1040. The reporting thresholds for Form 8938 are higher than for the FBAR and vary based on your filing status and location. For an unmarried individual in the U.S., the threshold is met if specified foreign assets are more than $50,000 on the last day of the tax year or $75,000 at any time during the year. It is possible to be required to file both the FBAR and Form 8938.