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How to report taxable but untaxed, un-withheld income from embassy work?

Zarinsky23
Level 1

A client worked for an embassy in 2020. His income wasn't reported on a W-2, wasn't taxed, had nothing withheld from it, but it was all taxable. He is a US citizen, he worked in the US (for the embassy), and that income IS fully-taxable.

Per IRS guidance, the client must pay self-employment tax (because Social Security wasn't withheld).

But the IRS also says to report it as wages on the 1040.

The only way I knew to report it was on Schedule C, but with no deductions or other benefits a true small businessperson would have. That is also from IRS guidance.

But doing it that way doesn't report it as wages.

The foreign income form (2555) didn't strike me as appropriate because the income IS taxable. And, I didn't know how to generate self-employment tax on income the software thought was untaxed (because it was input on the 2555).

Am I clear? I have a way of confusing the simple. 🙂

How to do this correctly to get the income to show as wages (Line 1)? Is that even possible? Does it even matter if it's Line 1 or not, as long as the income is counted and self-employment tax is accurately computed and assessed?

THANK YOU.

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