I am a bona fida resident of a foreign country and a self-employed teacher. Does the foreign income exclusion apply to self-employment income? .

[taxpml]

I want to pay SS and Medicare contributions.

[DanaB · Accepted solution]

Yes, if you are a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, your tax home in a foreign country, and have foreign earned income then you should qualify for the Foreign Income Exclusion. Please see Publication 54 for details. Please follow the instructions below: 

To enter your self-employment income:

1. Open your return
2. Click "Federal Taxes" on the top of your screen
3. Click “I’ll choose what to work on”
4. Scroll down to “Business Income and Expenses (Sch C)” and click "Start"
5. TurboTax will walk you through entering the self-employed income

To qualify for the Earned Income Exclusion:

1. Click "Federal Taxes" on the top of your screen
2. Click “I’ll choose what to work on”
3. Scroll down to “Less Common Income” and click “Start” next to “Foreign Earned Income and Exclusion”
4. TurboTax will walk you through the questions.

[taxpml]

Greetings Dana B.  Thank you for your help - however, I still have a question.  In particular with Schedule 1 - Additional Income and Adjustments to Income.    I have put my self - employment income into business  (eg 20,000) and my husbands income into wages (eg 10,000).  So the 1st line of my 1040 correctly shows 30,000.    Then on schedule 1, my self employment income of $10,000 shows up as additional income (line 12) - $30,000 correctly shows up on line 21 (Form 2555) - but then these are added together - and the exclusion reduces to $20,000.  Essentially my self-employment income is then NOT excluded.  Another way to look at it - is that my self-employment income shows up twice.  

[DanaB]

The self-employment income should NOT be included on line 1 of Form 1040. That is only for when you are an employee and work for someone (wages, salaries, tips). Self-employment income is only included on line 12 of Schedule 1.

[taxpml]

Thanks so much Dana.  Finally figured out the problem.  

I hadn't put my income in line 1 of Form 1040 Turbo Tax did - because I screwed up on Form 2555.  Turbo Tax was putting my self-employment income in line 1 AND as additional income because I somehow skipped a screen and didn't correctly identify my self-employment income in Form 2555.  My fault! Although I had clicked that our income came from wages (husband) and a 1099 (me) - in the beginning of the Form 2555 step-by step - there was a slide where I needed to put my self-employment income under  "gross profits from foreign self-employment".  When I blew past it and incorrectly put my self-employment under wages (next to my husband's wages) the program erased my click on the 1099 - and entered my "wages" in Line 1 to make my return consistent.  Consequently my meager salary showed up twice - once as business income - once as wages.

I knew I must have done something wrong - so I just went through the "step by step" again until I found the  "magic slide".  My tax obligation fell and all was right with the world.  🙂

Thanks again for your help!  Tried to erase the above messages last night when I figured it out.  Should have written a note instead.