How do I report foreign consulting income on schedule C? It is foreign income but it is related to my business.

[pk · Accepted solution]

if the foreign income was taxed in a foreign country, then you need to be able to show this income against foreign taxes paid -- form 1116.  If on the other hand , you consulted, got paid by a foreign client but did NOT pay any foreign taxes, then just convert the amount in US dollars ( using exchange rate when exchanged or anual average exchange published by the treasury, whichever is more apropo) and  include in your gross income on schedule-C

[bilsteint]

This does not answer the question of how you both claim the Foreign Earned Income Exclusion (form 2555) and report the same income on Schedule C as Self-Employment income. 

[Critter-3]

Review the following however this is not a simple subject to explain or complete ...I highly recommend you  seek professional assistance for the first time you try this. 

https://turbotax.intuit.com/tax-tips/general/filing-taxes-while-overseas/L8bP9GN5p

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-to-properly-enter-foreign-ea...

https://ttlc.intuit.com/community/taxes/discussion/foreign-earned-income-exclusion-and-foreign-tax-c...

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion

[pk]

@bilsteint  agreeing with @Critter-3  and the suggestions thereof,  especially this is your first time with filing for foreign earned income exclusion while self-employed, i.e. seek professional help.

However,  and not knowing the full scenario  ( your immigration status, where is  tax home, when did you arrive at the foreign land,  etc. etc. ) here is the general lay of the  process:

(a) you file a schedule-C  as part of your return   ( tell  TurboTax that you have self-employed income  but do not have a 1099-C .  You have to  input your gross income and allowable expenses using recognized/published  or actual exchange rate  -- TurboTax assumes everything  entered is in US$.   This should result  in net  income and schedule-SE  (  Self-Employment Tax ) which items will be shown on form 1040.

(b) you tell  TurboTax that you have foreign earned income and exclusion -- this will then take you through form 2555 qualifying you for the exclusion and entering the  exclusion amount as a negative number on proper schedule to affect the form 1040.

The reason for the suggestion to seek professional help is that you need to watch the froms to make sure  that the amounts are not double entered --- you can also do this in the "forms" mode using the CD/Downloaded version of the software.

A small point -- since this thread was from 2019, perhaps  it would have been better to start a new thread

[roykelly]

But what if the foreign county did withhold income taxes on the consulting income.  Then how does one enter it into the Schedule C and into the Turbo Tax system?  I know you need a Form 1116 but the entry in Form 1116 seem to be a derivative of other information so assume there must be a way to put this withholding foreign tax into Schedule C and have it linked to Form 1116.  Any suggestions?

[AmyC]

It does not go on sch C. If you are excluding the income on Form 2555, then you would not receive credit for tax paid on Form 1116.

If you are including the income on Sch C, no fomr 2555, then just add the Form 1116. Follow these steps:

1. Open your return and jump to foreign tax credit - enter exactly that way
2. Answer/ continue
3. Deduction or credit - most claim the credit
4. continue
5. simplified limitation may be offered to you- select your answer, continue
6. continue to Choose the Income Type
7. Select General category income for your sch C business, continue
8. Enter the country
9. continue
10. description of income and gross amount in USD
11. enter expenses and amount and deduct from gross income
12. continue
13. explain relation of expenses to income
14. continue, continue
15. select no, enter foreign taxes paid on Other Income
16. continue
17. done

@roykelly