cu2

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About cu2

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  • Location Stuttgart
  • Nationality American
  • Gender Female
  • Year of birth 1956
  1. Dear Mr Straightpoop,

    Hope you are well!

    Wondering if you could give me a few tips:

    I am really struggling to fill out the 2016 1116 and 1040. I am stuck from lines 15 to 30 and what to carry over to the Line 48 foreign tax credit 1040. I am going to file through the streamlined procedure. I am a freelance trainer and translator. I am aware of the SE tax and seem to know how to avoid it by marking 0 and writing totalisation agreement on the SE form itself. I have been blissfuly unaware of how difficult this would be and how utterly unprepared I am to understand the fine print and avoid the pitfalls. I actually filled in the 2555 and 1040s for all years until I read it is not for self-employed people, I have a tiny company and I do not have a W2 or equilvelant. I wanted to post on the forum but could not figure how to do so. I thank you so much, I have read many of your posts but still could not figure out what to do.

    Mary Ann (CU)

     

    1. Straightpoop

      " I actually filled in the 2555 and 1040s for all years until I read it is not for self-employed people, "

       

      You read wrong.

       

      The foreign earned income exclusion (IRC §911, Form 2555) is available to exclude earned income, i.e. income from "services" (e.g. trainer, translator) from self-employment. This is not a matter of interpretation or debate; it is clearly spelled out in the law, regulations and IRS published guidance.

       

      If your GROSS receipts from services are under the exclusion limit, then you have effectively eliminated your US income taxes on that particular source of income.

       

      This does not, of course, change the fact that you are subject to SE taxes on your NET self-employment income (gross receipts less deductible business expenses) whether you exclude the gross receipts or not.  To avoid those taxes, you must do more than simply "marking 0 and writing totalisation agreement on the SE form". You must also apply to the Deutsche Rentenversicherung for a Certificate of Coverage (Form USA 101A) to establish your right to exclude your SE income from US SE tax.

       

      I would suggest that before you "bare all" to the IRS via the streamlined procedure, you seek professional help. At least long enough to get safely back into the "system" and learn how these forms work. After that you can do your annual returns by yourself without much risk one way or the other.

       

      SP