Foreign Income as self employement

Forum|Forum|2 years ago
October 23, 2023
2 replies
22 views

I have a client with income from Australia as self-employer. While I am putting all information on 1116 form and 2555 form it still shows that he needs to pay self-employed tax and he is not supposed because US has the agreement with Australia. I want to know please what the steps are to report that income? So, you first create schedule C as usual? Is it a way for schedule C to flow on those foreign forms? Am I missing a step, or do I need to do any adjustment manually?

Individual

This topic has been closed for replies.

T

Terry53029

Intuit Community Champion

I am not familiar with the Australia treaty, but if you want to exempt any schedule C income from SE tax you use the schedule SE adjustment work sheet, and I would put the amount exempt in part 2 line 7. I would also put the treaty description and amount in the supporting documents statement (letter icon to right of amount line 7)

sjrcpa

Level 15

There's a form to use to report a treaty based return position. 8833

The more I know the more I don’t know.

S

SiboraAuthor

Level 3

I am not being able to find that form 8833 on ProSeries. Where do you find that?

T

TaxGuyBill

Level 15

If you are filing 1116 and 2555, it sounds like your client is a US Citizen or US Resident Alien, right?

Yes, the income and expenses are reported on Schedule C. The reduction of income tax is on the 2555 and 1116.

If your client is exempt from Self Employment tax because the he pays Social Security to Austraila and the Totalization Agreement says he is only subject to Australian Social Security, I'm not sure if ProSeries is set up to do that and I just looked and couldn't find a way. If it isn't, you might need to do things manually and paper-file the return. As for what the tax return should show for that, see the links below.

https://www.irs.gov/pub/irs-utl/2019ntf-30.pdf#page=17

https://www.irs.gov/instructions/i1040sse#en_US_2022_publink24334pd0e305

S

SiboraAuthor

Level 3

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?

Sign up

Login with SSO

Let's get you signed in

Login with SSO