1099 NEC declare as foreign income

[ThomasM125]

You would claim that income the same as if you received it from a client in the United States. You enter it in the Self-Employed Income section of TurboTax, along with any related expenses. 

If you paid any foreign income taxes on the income, you can apply for a foreign tax credit in the Estimates and Other Taxes Paid section, in the Deductions and Credits section, and then Foreign Taxes.

[lori94010]

So I would enter it in Business Income under General Income right? I did not receive any type of 1099 from them, so I was not able to enter it in the 1099-NEC or MISC sections. Thanks for the quick reply and for the help!

[ErnieS0]

Yes. Enter the amount as General Income @lori94010. The actual self-employment form, Schedule C, only includes one line for all gross receipts and sales. TurboTax adds additional categories to help you get organized.

[Red Zee]

Hello, 

I am a US citizen living abroad but doing contractual job for US Employer who sends me 1099-NEC. Do I qualify for Earned Income Credit even though my husbnad & I lived outside of the US for most of the year?

[pk]

@Red Zee , under the doctrine of  income  sourced to where work is actually performed,   has only  a small carve out ---   those paid by the US govt. or any of its departments/subsidiaries.  Thus  even though someone works in Germany, if he/she is paid by the dartment of defense, that income is sourced to the USA and therefore not eligible for "foreign earned income" exclusion.  In your case , your income would be considered  self-employment  sourced to your tax home  and therefore eligible for  earned income exclusion.  Note also that  this self-employment income , while being reported on Schedule-C and recognizing  deduction of usual/customary /allowable expenses associated with this income stream, is subject to  SECA ( equivalent to FICA -- social security & medicare taxes for wage earners)  at 15.3%  taxes -- reported on Schedule-SE.

Does this answer your query ?  Is there more I can do for you ?

pk

[rmcafe22]

Hi @aliceyy and @Red Zee, I may be in the same situation as you...

-I am a US citizen living outside the US (all 365 days of the year).

-I work for an international organization and I do perform the services in the foreign country I live. 

-The international organization sent me a 1099-NEC. 

I understand that I should label my earned income as foreign income (and exclude up to the limit), but the tax software tries to put it on Schedule C (which seems completely wrong as I do not own a business)!!  

Any thoughts?
Any experts to help me?

Thank you all in advance.

Best!

[pk]

@rmcafe22 , the answer above should be applicable to you.  Note that even though 1099-NEC  is specific  for incomes  of Non-Employee  ( Compensation),  unless Federal  taxes were withheld ( most likely situation ), you have to use the Schedule-C to show the income, the expenses ( probably none ), and essentially compute the net income -- this will then  transfer to the federal 1040 as ordinary income  ( under business ) and also trigger the preparation / filing of Schedule - SE  ( SECA  taxes equivalent to  FICA of employees in the USA  ).

Is there more I can do for you ?

pk

[rmcafe22]

Hello @pk ! Thank you a lot for your reply! 

I don't quite understand if this can be deducted or not as foreign earned income. From the 2555 instructions, I understand that I comply with both the requirements.

And Schedule C is for business in the US, isn't it? Therefore, not entitled to foreign income exclusion.

Besides, I do not own a business and I am not in the US, so it seems to be wrong...

[pk]

@rmcafe22   if you are US person ( citizen/Green Card ), you are required to file a US return covering your world income.   A US entity issuing a 1099-NEC to a foreign worker is not correct  really  but would be correct for issuing to a US person -- the issue here is that you a US person earned this income as a foreign person ( worked while stationed abroad). Thus the quandary --- to you this is foreign income because it was earned abroad, tax home foreign.

1099-NEC is reported using Schedule-C whether you are a self-employed/ a contractor/ sole proprietor etc.  -- it is not specific to business -- just where you work independently and not for a employer  ( whether US based  or not ). 

 For your ref: ---->  https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

See page C-5 ..Line 1.

I hope  this satisfies your doubts about using Schedule-C to report 1099-NEC  income

[rmcafe22]

@pk Thank you for your detailed explanation! Cristal clear!

[hyoksoo]

What is your conclusion? Is it okay to add 1099-NEC amounts to Form 2555(Foreign Earned Income) without Schedule C?

[pk]

@hyoksoo , please tell me more of the situation :

are you a US person ( citizen/ GreenCard/ Resident for Tax purposes )

where is your tax home  ( in the USA or abroad)

How/why did you get a 1099-NEC  ( were you living abroad but worked for a US entity  or what )

If you are abroad -- which country, when did you arrive there

I will circle back once I hear from you 

[DaveF1006]

No, it is not permissible to report this return without a Schedule C. Since you are a US person who is trying to exclude his/her foreign income, it is a two-prong procedure. Please use the following procedures to prepare your return.

First you need to prepare a Schedule C declaring your income and expenses for the year,  This is done to determine your self-employment tax for the year. After the self-employment tax is determined and reported, you will prepare an entry to exclude the net income from your return.

Next you will report your gross income and determine your exclusion from your return.  Here are the order of steps that need to be completed. To prepare Schedule C.

1. Log into or open your return.
2. Go to federal
3. Wages and Income
4. Self-Employment
5. Self-employment income and expenses

After you have completed this, you will need to exclude the net income from your return, leaving just the self-employment tax, which you are required to pay.  These are also referred to FICA taxes, which are your Social Security and Medicare taxes.

1. Log into your account
2. Select Wages and income>other income
3. Miscellaneous Income, 1099-A, 1099>start
4. Scroll to the bottom of the page to Other Reportable Income
5. Other taxable income, answer yes
6. Then give a brief description of the income and the amount listed.. Here you will enter 1099 NEC income excluded for FEIE purposes and record the amount of net income with a minus sign in front of it.

Now to report your foreign income.  Remember in this case, you will report the full amount that is recorded on the 1099 NEC.

1. Click on Federal 
2. Click on Wages and Income  
3. Scroll down to Less Common Income
4. On Foreign Earned Income and Exclusion, click on the start or update button.

[hyoksoo]

@pk I am a US citizen. My tax home is abroad. I live and work for a US company in South Korea. I'v been living in South Korea since Nov 2018. 

Thank you for your help and looking forward to hearing from you.

[hyoksoo]

@DaveF1006  Thank you for your kind explanation. I tried what you mentioned. However, since self-employment income is related to other taxes, it doesn't help exclude the amount of the tax I pay.