Nonresident aliens are not subject to self-employment tax. However, self-employment income you receive while you are a resident alien is subject to self-employment tax even if it was paid for services you performed as a nonresident alien.
Example:
You are an author engaged in the business of writing books. You had several books published in a foreign country while you were a citizen and resident of that country. During 2014, you entered the United States as a resident alien. After becoming a U.S. resident, you continued to receive royalties from your foreign publisher. You report your income and expenses on the cash basis (you report income on your tax return when received and deduct expenses when paid). Your 2014 self-employment income includes the royalties received after you became a U.S. resident, even though the books were published while you were a nonresident alien. This royalty income is subject to self-employment tax in 2014.
Effect of Foreign Earned Income Exclusion
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.
Example:
You, as a resident alien or US citizen, are in business abroad as a consultant and qualify for the foreign earned income exclusion. Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. You must pay self-employment tax on all of your net profit, including the amount you can exclude from income.
