Is it possible to be exempt from the self-employment tax while living and working abroad?

[bahamilton]

We do contract work on foreign soil for a foreign company. I entered all our foreign income and we are able to pass/earn all the exemptions in regards to foreign income deductions. It says we owe nothing. However, I am reading that you must pay a self-employment tax regardless. TurboTax says $0 but how/where would I pay this tax? Or am I completely exempt from it? We do contract work so we are 'self-employed.'

[SusanY1]

As a contractor, you are still subject to self-employment tax even when your income is otherwise eligible to be excluded from income tax using the Foreign Earned Income Exclusion except in cases where you are covered by the foreign country's similar system and a bilateral social security agreement.  I am going to assume that is not the case for you, so you will need to pay the self-employment tax on your contractor income.  In order to get TurboTax to calculate this tax you must indicate that the income is from self-employment and not from wages.  

In TurboTax you can indicate that the income is subject to that tax by selecting the checkbox that reads "Form 1099-MISC or other self-employment income" for the question "What Form(s) was the foreign income reported on?"  This question is prompted in the online edition of TurboTax after you answer "yes" to the question "Did you make any money outside of the U.S.?"  The program will give you an opportunity to enter any expenses related to this income so that you will only pay the self-employment tax on the net profit.  This will prompt the program to calculate the tax and attach the appropriate schedules to your return.   

If you do not see these questions please use the search function in the program and search for the term "foreign income" and then select the option "Jump to Foreign Income" to see or re-visit these questions. 

If you have already followed these steps and still do not see a tax calculated please choose "Review" from the menu on the left side of the TurboTax menu and allow the program to check for any critical missing data that may be preventing the program from completing that calculation.  Sometimes the numbers in the meter won't change until more sections have been completed to allow the program to properly calculate the tax after taking other factors into consideration.  

[bahamilton]

@SusanY1 Thanks for the very detailed response.  I did exactly as you said and it still says $0, even when going to the review section. Georgia does have a tax treaty with the US but I've tried reading the official document about it and it goes over my head.

EDIT: Now it shows 0$ income but when I put in numbers (net profit, etc.) then it doubles my income. Now everything is buggy.

[SusanY1]

Based on the information given that  some numbers are now doubled and you're still seeing zero, I would suggest that you clear the return and start over fresh.  It may take a little extra effort, but it will likely be simpler than trying to continue to troubleshoot.   

 To clear and start a return over:

1. Login to the TurboTax program at TurboTax.com
2. In the menu on the left side of the screen click on "Tax Tools" 
3. Click on "Clear & Start Over" in the Tax Tools menu
4. Confirm that you wish to clear when prompted by clicking "yes"

If your return is very complex and you don't want to start completely over, I recommend deleting the forms related to self-employment income to see if that will resolve the issue.  The forms to delete include Schedule C, Schedule C-EZ, and/or Schedule SE.

You will not see all of these forms, but you want to delete any of these that you do see.   To delete a form follow the same directions as above except in Tax Tools select "Delete a Form" and then select the forms you wish to delete.  This may clear those forms and their supporting data out.