Form 1040: do I use schedule C to do an EXPAT's self-employment tax?

[helenyin]

My client worked for a foreign company overseas during the entire year of 2024. He is not the owner of the business. He got paid by salary, and he paid the income tax in the foreign country. 

How do I do his self-employment tax in ProSeries Basic? Do I use Schedule C?

Thanks.

[sjrcpa]

No Schedule C.

Someone who uses ProSeries can chime in but you're looking for a way to adjust the Schedule SE income I think.

[jeffmcpa2010]

Schedule SE Adjustments Worksheet

I would probably put it on Line 6.

As long as it gets paid, I don't think you can get in too much trouble if the description doesn't fit exactly.

[helenyin]

That's good to know. Thank you.

[helenyin]

Do I deduct the expenses and put in the net number, which would be less than the gross income amount reported on his foreign tax paid document?

[sjrcpa]

No, Gross is subject to the tax. Pretty much like Gross U.S. Wages.

[helenyin]

Here is what I found out from the IRS website:

Effect of foreign earned income exclusion

You must take all your self-employment income into account in figuring your net earnings from self-employment, even if all, or a portion of, gross income was excluded because of the foreign earned income exclusion.

Example:

You are in business abroad as a consultant and qualify for the foreign earned income exclusion. Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. You must pay self-employment tax on all your net profit, even if you claimed the foreign earned income exclusion.

[BobKamman]

Now that you have found Pub 54, where does it says that an employee of a foreign company, working in that country, must pay US self-employment tax?  We can't even start to answer your question without knowing what country is involved. 

Bilateral Social Security (Totalization) Agreements

The United States has entered into agreements with some foreign countries to coordinate social security coverage and taxation of workers who are employed in those countries. These agreements are commonly referred to as “totalization agreements.” Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. The agreements generally make sure that you pay social security taxes to only one country.

Generally, under these agreements, you will only be subject to social security taxes in the country where you are working. However, if you are temporarily sent to work in a foreign country and your pay would otherwise be subject to social security taxes in both the United States and that country, you can generally remain covered only by U.S. social security.

You can get more information on specific agreements at Social Security Totalization Agreements and IRS Totalization Agreements.

[helenyin]

Not in a country covered by the totalization agreement. 

[helenyin]

Based on my research, I found these Q&A very helpful.

https://alliscpa.com/social_medicare.php

[Terry53029]

In Pro-Series Pro there is a schedule SE adjustment worksheet. Don't know if it is in basic

[BobKamman · Accepted solution]

As the link says, " Employees of a foreign company are not subject to FICA while working outside the states."

[helenyin]

Thank everyone who participated in the discussion.