US citizen Expat in Germany, with Self employment income: how to efile with zero SE tax due to Totalization Agreement.

[skaufmann]

Asking this before buying turbotax:
Is it still true that turbotax (neither desktop or online version) will let one efile if SE tax is made zero.
Is it still true that one has to attach a certificate of coverage (every year even from a country known to have totalization agreement)
Is it still true that if one has to attach the statement of coverage, the taxes will have to be filed manually (paper file, no e-file).

If the above is not true, may I request some guidance to indicate coverage in Germany and make SE tax zero, indicate exemption and e-file.
Thanks

[pk]

@skaufmann , recognizing that my answer may be useless ( because I am not familiar with the on-line version -- screens  and/or limitations thereof ),  would like to say that ;

(a) immunity from  paying SECA taxes to US is contingent upon  providing proof of "participation"  from  tax-home country ( assuming that country is party to totalization agreement ).  This is generally required for each year.    See the following --> Totalization Agreements | Internal Revenue Service 

(b) while another of my colleague answers  , I will create your scenario on Windows Home & Business and see if  all the checks are passed and  return is ready for  transmission ( e-file ).

(c) I do recognize that the actual wording of the above ref'd  document from the IRS does not say anything about whether just having the certificate is sufficient or it must be  transmitted each year.

Grusse

pk

[skaufmann]

@pk 
No answer from you can ever be useless. I always appreciate your expertise and your time to reply, vielen Dank!

I await your colleague's response and your experience with the hypothetical scenario.
Best.

[pk · Accepted solution]

@skaufmann , your answer jogged my memory --  I  sort of remember having a similar discussion with you perhaps last year.  Also tried out on my copy of current / updated  2025 TurboTax, Windows H&B, looked through IRS write-ups.  Conclusion :

(a) IRS appears to be talking all about  from employer's aspect i.e.  how to avoid withholding of  SECA/FICA, certs they need etc.

(b) the  Schedule-SE is all concerned and allows for SECA/FICA immunity by preapproval and/or explanatory note  ( for both priests, farm employees and non-farm employees ). 

(c) there is no language covering whether one needs to show proof of "participation " only once or eveh and every year.

(d) SSA site does not help either

So what I did is  -- claim FEIE  ( for  foreign wages ), and self-employment ( schedule-C ) for additional  foreign income -- subject to  SE taxes.  Then went to forms mode and  checked the box claiming immunity from SE taxes under Non-Farm earnings, added  " explanation" --- (  " participating in   German SSA -- totalization country" ). .  This made SE taxes to zero and TurboTax found no errors-- thus ready for filing.    While this passes all tests  and allows for inclusion of "explanation" as required by the form,  I have no way to prove that it passes an audit ( if ).  This is because  the explanation may not be in the right place --- but I am certain that in a challenge / audit I can show that I have done the needful even if show on the wrong line.

Hope this helps --- is there more I can do for you ?

pk

[skaufmann]

@pk

Thanks for your time and reply. It is still not too clear how one actually does this. e.g. in the SE schedule, I only see this in part II (No such thing like a box to choose the option claiming immunity from SE taxes). 
Also the nonfarm option states "you could use this for only 5 times" so this is not a long term solution?

Lastly, the explanation note is needed on "Write Exempt, see attached statement on Schedule 2, Part II, line 4 (Self-employment tax) and attach your exemption certificate."....here Turbotax states you cannot efile, it has to be printed and mailed as there is not way to attach a certificate"  Hence my earlier question if things have changed in 2026 software or does this force one to print and mail?
Thanks

[pk]

@skaufmann , going back to our discussion re: Schedule-SE.

While working on another 1116 issue, I came across Schedule-2 for 2025 and there is a box to check if you live/ earn in a foreign country with totalization agreement.  Turbo does have that box ( but I have not had a chance to test this yet ).  The instructions for Schedule-2 says --- 

"If you are a U.S. citizen or resident alien living outside the United States
and your self-employment income is exempt from self-employment tax, you should get a statement from the appropriate agency of the foreign country verifying that your self-employment income is subject to social security in that country. Attach a copy of the statement, check box 3, and enter “EAS” on the entry space next to box 3."

Ref :  2025 Instruction 1040 -- page 112

Hope this helps