U.S. citizens and resident aliens must report income from all worldwide sources, including sources outside of the United States on their tax return unless the income is considered exempt by U.S. law.
The physical residence of the taxpayer is not a factor in whether the income should be reported. If the taxpayer is a U.S. citizen or resident alien*, the income must be reported; however, part or all the foreign earned income may be able to be excluded if the taxpayer resides outside of the United States.
A professional golfer, for example, Jordan Speith, plays in Scotland at the Muirfield Golf Club and wins the 2017 Open and earns $$$$$. Jordan reports his winnings on his federal tax return.
* If the taxpayer is an alien (not a U.S. citizen), he is considered a nonresident alien unless he meets one of two tests:
• Green card test or
• Substantial presence test for the calendar year
For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as resident aliens and nonresident aliens. Resident aliens are taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their U.S. source income.