Foreign Income Exclusion + Self Employment

[Dafeiji716]

I worked abroad for several years as a teacher in public schools, qualifying for foreign income exclusion by physical presence. Although I worked for a school as an employee, I filed it as self-employment income because employer info did not fit the forms very well. Every year, Turbotax showed my tax liability to be zero.

In 2019, I quit the school I was working for did private tutoring for several months before moving back to the US. I no longer qualify for the physical presence test, so I started doing research about tax filing an suddenly self-employment overseas entails 15% self-employment tax? Is this real? How has this never come up in years past?

Additionally, I did not keep precise records of my income, and it was all cash. I do trust the banks of the country I was living in, so I did not make deposits. How do I report income without getting in trouble when I can only estimate my earnings? Thank you for any bona fide response to my questions.

[KarenJ2 · Accepted solution]

If you are self-employed, then you need to pay the $15.3% FICA tax on your net income.   I do not know why this wasn't calculated on your prior returns.  You must enter you income in the self-employed section of TurboTax before entering it in the foreign earned income exclusion section.

If you have no foreign tax that you paid on your income and you do not qualify for the foreign earned income exclusion, then there is  no reason to enter the income as foreign income on your return.  

If you did not track the tutoring income you received, all you can do is to estimate the amount of income you received and enter that income as self-employment income.  Did you have any expenses to help offset your income?  You can claim mileage, supplies, home office deduction, etc if they apply to you.  You will need the Self-Employment version if you wish to claim deductions.

[Dafeiji716]

Thank you.

[Dafeiji716]

Will the FICA tax apply to my self-employment net income below the standard deduction for an unmarried person with no dependents? My income was not substantial because I worked sporadically just to fund backpacking trips around the country I lived in. Really talking around $8,000 net profit in 2019. I understand the FICA tax applies to anything over 400 dollars, but if I only made so much as an employee of a company, I know all of that would be refundable. So I'm trying to make sense of what this law means.

Thanks.