When you have foreign self-employment income, you can exclude the amount of the business profit from regular income tax, but you are still required to pay self-employment tax.
It's hard to know with certainty without more information, but it sounds as if you may be entitled to some tax credits that are lowering your overall tax when you do not exclude the income. Refundable credits, such as the Additional Child Tax Credit (ACTC) would cause something like what you're seeing, but taxpayers claiming the Foreign Earned Income Exclusion (FEIE) aren't eligible for this credit.
If you have dependent children under the age of 17 on your tax return, this would be the most likely explanation. If you paid foreign income taxes on this same income, you may get a better result claiming a foreign tax credit rather than trying to exclude the foreign-earned income.
However, if you have taken the FEIE in the past failure to do so constitutes revocation of the election and bars you from taking it for 5 years. We urge customers considering a switch to consult with a professional prior to doing so to examine whether the revocation makes sense for the long term. It is possible to get permission from the IRS to resume the FEIE before the 5 years, but it is a complex and expensive process.
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