Yes, that is correct. He is a US citizen but lives and work in Australia. I have completed the 2555 and 1116 but through those forms I am not being able to adjust his Self-employment tax. Every entry that I have made on those forms is not changing nothing. Am I doing something wrong on completing those two forms? Yes, it is the agreement between USA and Australia, thank you for the links.

But is it not correct to adjust the self-employment on schedule SE like suggested above? It looks like that is the only way for him not to pay tax. I am getting really frustrated because I have been working on this case for one week and not being able to find a solution. No one ever had these case before. Is it really necessary to do a paper return? That is no other way?