U.S. Citizens or Resident Aliens Living Outside the United States
If you are a self-employed U.S. citizen or resident alien living outside the United States, in most cases you must pay SE tax. You must take all of your self-employment income into account in figuring your net earnings from self-employment, even income that is exempt from income tax because of the foreign earned income exclusion.
Per the IRS Instructions for Schedule SE
(Form 1040) Self-Employment Tax
, page SE-2: Exception.
The United States has social security agreements with many countries to eliminate dual taxes under two social security systems. Under these agreements, you must generally pay social security and Medicare taxes to only the country you live in.
The United States now has social security agreements with the following countries:
Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, South Korea, Spain, Slovak Republic, Sweden, Switzerland, and the United Kingdom. Additional agreements are expected in the future.
If your self-employment income is exempt from SE tax, you should get a statement from the appropriate agency of the foreign country verifying that your self-employment income is subject to social security coverage in that country. If the foreign country will not issue the statement, contact the Social Security Administration (SSA) at this address:
Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, MD 21235-7741 USA
Do not complete Schedule SE. Instead, attach a copy of the statement from the appropriate agency of the foreign country to Form 1040 and manually enter Exempt, see attached statement
on Form 1040, Line 57.
To remove Schedule SE from your TaxACT return if necessary:
- From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
- Click Taxes to expand the section and then click Self-employment tax adjustments
- Click Continue or No until you reach the screen Self-Employment Tax - Adjustments
- On the line Other adjustments (+ or -) enter the amount (as a negative number) which should be exempt from self-employment tax and click Continue. Schedule SE will no longer be a part of your return if the entire amount was entered to be exempt.
- Print the return and manually enter the text Exempt, see attached statement on Federal Form 1040, Line 57 and attach a copy of the statement from the appropriate agency of the foreign country to Form 1040.
Note: Due to the need to enter text on Line 57 of Form 1040, and to include the statement, the return would need to be paper filed. Click on the Filing tab and select Mail My Return to complete that process.
Please refer to IRS Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad for additional information.