@davidchl ,
(a) Assuming that you are US person ( Citizen/GreenCard ) and having a tax home abroad ( which country please ? ),
(b) You were employed by local entity with an income of US$120,000; you are claiming no other employer paid benefits like housing etc.
(c) You self-employment income ( work performed outside of USA ) is ( and as reported on Schedule-C ) shows a gross income of US1000 and allowable expense of US$50 i.e. a Schedule -C net i taxable income of US$950.
In such a case, you would report your total Foreign source income ( for purposes of form 2555) as US$12950. Thus your Foreign Earned Income Exclusion amount would be US120,000, leaving you with US$950 of unexcluded income.
This would mean that your US taxable income would be US950 LESS your Deductions . Thus your US tax liability should be zero and therefore any foreign tax credit would be nil.
However, unless you assert " certification of participation" in SECA/ Social Security of your tax home, you would be liable for SECA ( 15.3% on approx. 92% of your net self-employment income).
Does this make sense ?
Is there more i can do for you ?
