How should I account for income from a Foreign Source?

[Perigeum]

I am forming a business with a friend to provide mechanical design work and project management to a company in Taiwan. Essentially we are acting as full time contractors to this single company, although we plan to branch out and work for other companies in the future.

For the time being, I will be recieving payments via bank transfer. I plan to set up a small business bank account and operate as a sole proprieter for the time being. As long as I keep track of the regular, monthly deposits to this account, and file my estimated taxes on time, will this be sufficient information for the IRS?

Thanks in advance!

[OldJack]

As you are still a resident of the USA you would not meet the requirements to file form 2555 (foreign income exclusion - see pub 54), all foreign income is taxable the same as if you earned/received the income from anywhere here in the USA. As a sole proprietor your bookkeeping requirements are only that you keep tract of your gross income and proof of your deductible expenses. As a sole proprietor the gross income is reported with your regular tax return on 1040 Sch-C with deductions for business expenses. The net income is subject to self-employment taxes on form 1040SE and the tax added to your form 1040 pg 2. As you already know estimated income taxes (including self-employment taxes) are paid with form 1040ES. no big deal.