Personal Services Source Rule Guide for Foreign Founders (2025-2026)

For personal services, the source question usually begins and ends with where the work was performed

The IRS sourcing pages say it plainly: personal service income is generally sourced where the services are performed. Founders still get tangled because the invoice may come from one country, the contract may be signed in another, the client may be in the U.S., and the money may land in a U.S. bank account. None of that changes the core sourcing rule by itself.

If a founder understands that one sentence early, a large amount of cross-border confusion disappears.

Payment location and client location are not the same thing as service location

A foreign consultant can be paid by a U.S. company into a U.S. account and still be performing all services abroad. The reverse can also happen. A founder can think the business is offshore while a short burst of work physically performed inside the United States changes the analysis for that slice of income. That is why calendars and work logs matter more than bank screenshots.

The file should show where the work actually happened

A good year-end file includes contracts, invoices, a travel calendar, and a short summary of where the services were performed. That lets the sourcing conclusion rest on facts instead of assumptions.