Foreign income exclusion - can't eliminate self-employment tax

[TaxGuyBill]

Because you are paying SE tax to a country that the US has a Totalization Agreement, this is what you need to do:

1. You need to go into the section called "Business Taxes",
2. Then "Self Employment Tax",
3. Then "Make Adjustments",
4. Then for "Other SE Nonfarm Profit (Loss)", enter your business profit as a negative number.
   

After you print your tax return, you then need to write "Exempt, see attached statement" on Line 57 of your Form 1040, and mail your tax return along with your certificate of exemption.



To establish that your self-employment income is subject only to foreign social security taxes and is exempt from U.S. self-employment tax, request a certificate of coverage from the appropriate agency of the foreign country.  If the foreign country will not issue the certificate, you should request a statement that your income is not covered by the U.S. social security system.  Request it from the U.S. Social Security Administration.  Attach a photocopy of either statement to your Form 1040 each year you are exempt from U.S. self-employment tax.  Also print “Exempt, see attached statement” on the line for self-employment tax.

https://www.irs.gov/individuals/international-taxpayers/self-employment-tax-for-businesses-abroad

[TaxGuyBill]

That is correct.

The Foreign Earned Income Exclusion is for income tax.  Unless you are also paying Self-Employment Tax to another country, you still owe Self-Employment Tax.

[epentsa]

I live in Canada and the US-Canada have an agreement on dual taxation. I've already paid self-employment tax in Canada and should be exempt. How do I complete this on TurboTax?

[kmichaels]

I have the same question. When I enter my foreign income and enter my foreign business information into Schedule C, I'm still be shown I owe self-employment income. I can't figure out how to get rid of it even though I've already paid it in Canada.