Owing self-employment tax to the U.S.

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For the past couple years, I send in the DUSA/101 with the 1040 and Schedule C, but without Form SE. I usually entered "0" in the self employment tax line on the 1040. I would also include a letter with 1 sentence saying I was exempt by tax treaty and was attaching the DUSA/101 form.

 

I saw somewhere, maybe on the turbotax website, where it said to enter "EXEMPT" in the self employment tax line on the 1040, where I used to enter 0. I might try that. But I haven't been sending in an empty or zeroed Form SE.

 

I wonder if I should include Form SE next time. What do you enter for the lines on Form SE?

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@thomash2

 

If I were you I would stick to the procedure you have followed successfully to date regardless of what I have recommended.

 

I have always filed Schedule SE out of caution and that technique has always worked for me.  Your experience, however, makes clear that following the IRS instructions also seems to work too and that my assumptions about what the IRS computer does in the absence of a filed Sched. SE may be simply wrong.

 

If you were to add a Sched. SE you would use the "short form".  Just fill in the net taxable income from Schedule C and the net amount subject to SE tax and then (if you're using software) override the calculation of tax and enter "0".  

 

The IRS requires those filing a certficate of coverage DUSA/101 to file on paper so before printing out the return I overprint the .pdf version of Schedule SE with the words: "Treaty Exempt per IRC §1401(c) and Germany-USA Social Security Treaty". The overprint appears to the immediate left of the "0" bottom line. (In the past I have also used a self-adhering label with those words and placed it to the immediate left of the "0" bottom line of Schedule SE.)

 

I also put the words "Treaty Exempt" on Line 57 (or whatever the new line number will be on the 2018 revamped forms) showing SE taxes and, of course, the certificate of coverage.

 

 

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On 4/26/2016, 5:34:57, Straightpoop said:

Unfortunately, I still haven't figured out how to reply to a PM so for anyone interested here again is a sample request for a Certificate of Coverage D/USA 101A.  There is no specific form required but this model covers the information specifically addressed in guidance given by the US Social Security administration. There are also other model applications appearing elsewhere in various threads on this topic on TT:

 

SAMPLE

(Your Name and Address Here)

 

Deutsche Rentenversicherung Nord

 

Friedrich-Ebert-Damm 245

 

22159 Hamburg

 

 

OR:

 

Deutsche Rentenversicherung Bund

 

BKZ 5017

 

10704 Berlin

 

 

I sent a request to the Deutsche Rentenversicherung Nord using the format suggested in this post.  I sent it 2 months ago, but I still have yet to hear anything back.  I sent it to the Hamburg address.  It was the first year that I tried to do this.

 

Has anyone requested the form this year and did you get a response?  Which address did you send to and how did you format your request?

 

I also noticed there was an official request form for the D/USA 101, but it looks like it's oriented toward businesses requesting for their employees, not self-employed people.  The address for this form is the Berlin address.  Has anyone tried using this form for self-employment?

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If you don't live in Hamburg, then I wouldn't send it to Hamburg, because Hamburg probably only deals with people who live in the northwest.  I assume that Berlin is the central office, and I used to get the certificate issued from there.  But last year it was issued from the city that I live in, and the letter had a fax number to the local office.  So I simply faxed the request to that number, along with a copy of an old certificate, and they sent me the new year's certificate from that same office that I faxed to, after a couple of weeks.  The old certificate had an insurance client number, which I didn't include in my past letters.  But this year I included the number with question marks around it, and the copy of the old certificate that I included had the number anyway.  Perhaps the client number helps to expedite the request.

 

It doesn't hurt to send another request again.  If you have an old certificate, you can check the fax number on it and decide if you want to fax instead of posting it.

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On 6/2/2019, 8:12:59, asciiman said:

 

I sent a request to the Deutsche Rentenversicherung Nord using the format suggested in this post.  I sent it 2 months ago, but I still have yet to hear anything back.  I sent it to the Hamburg address.  It was the first year that I tried to do this.

 

Has anyone requested the form this year and did you get a response?  Which address did you send to and how did you format your request?

 

I also noticed there was an official request form for the D/USA 101, but it looks like it's oriented toward businesses requesting for their employees, not self-employed people.  The address for this form is the Berlin address.  Has anyone tried using this form for self-employment?

 

I tried the same thing but sent it to Berlin (where I live) and haven't heard anything in over two months. I even sent a followup about a month ago. 

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On 7/15/2019, 4:17:05, artishard said:

 

I tried the same thing but sent it to Berlin (where I live) and haven't heard anything in over two months. I even sent a followup about a month ago. 

 

I live in Nuremberg these days and I sent D-101 requests both here and to Hamburg. It took 3+ months, but finally both have gotten back to me.

 

Guys, I'm struggling again with the changes on the 1040. Just when I finally had it figured it all out last year, too. Has anyone filed already for 2018 and can help me out here? Looking for a clue where now, as in which line, we should mark Exempt on the SE tax? I wish I could say I even have a best guess, but I'm staring at this thing totally clueless. It doesn't look like it uses the same language or math logic.

 

And how am I supposed to convince my tax software that I don't owe this tax? Willing to switch programs if someone can recommend something. What a headache.

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11 hours ago, Guten said:

 

 Looking for a clue where now, as in which line, we should mark Exempt on the SE tax?

 

 

Line 57 (same as before) now located on Schedule 4

 

11 hours ago, Guten said:

And how am I supposed to convince my tax software that I don't owe this tax? Willing to switch programs if someone can recommend something. What a headache.

 

Try going to Schedule SE and overriding the computed result and/or the basis for computation carried over from Schedule C so that the tax result is "0".

 

If that doesn't work, print out Schedule SE, white out the tax or stick an opaque label over it bearing the word's ("Treaty Exempt" IRC §1401(c)) and file your return on paper.  (If you are claiming treaty exemption and attaching a D-USA 101 you have to file on paper anyway.)

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I have no idea how to deal with self employment income, specifically, but I had the same problem on the new 1040 form - where to deduct my foreign earned income?

 

I used the method described here and deducted foreign income on line 6:  https://www.greenbacktaxservices.com/blog/expat-taxes-explained-completing-form/

 

it's actually a very good example as it includes how to handle income from self employment too

 

I did everything by hand though.  no idea how it might work in the tax software nor if any of this might help you.  Good luck!!!

 

eta:  if you are not filing the foreign income exclusion, you would have to file for the foreign tax credit - either way it should clear any tax owed, but which method are you using?

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On 7/29/2019, 12:04:18, lisa13 said:

I have no idea how to deal with self employment income, specifically, but I had the same problem on the new 1040 form - where to deduct my foreign earned income?

 

I used the method described here and deducted foreign income on line 6:  https://www.greenbacktaxservices.com/blog/expat-taxes-explained-completing-form/

 

it's actually a very good example as it includes how to handle income from self employment too

 

I did everything by hand though.  no idea how it might work in the tax software nor if any of this might help you.  Good luck!!!

 

eta:  if you are not filing the foreign income exclusion, you would have to file for the foreign tax credit - either way it should clear any tax owed, but which method are you using?

 

The method you linked is pretty similar to what I do. To answer your other question, I'm doing the Foreign Income Exclusion.

 

As for my own question, well, the software I was using is TaxAct. Since nothing in my return triggers Schedule 4 to be included, there was no way to manually add it (and yes, line 57 on the 1040) to my return. When I contacted TaxAct about this, they said I should simply print Schedule 4 from the IRS website, write my Exempt statement on it as per the usual rules, and include it with the return. So that's what I've done, and I'll drop the whole stack of paper in the post tomorrow. I'll be sure to come back and say so if I encounter any problems.

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This thread is super helpful, thank you everyone!

 

I called a local office (small town Niedersachsen) and they had no clue, but the Hamburg office seemed to know what I was talking about.  I wrote to them 4 weeks back and haven't heard anything.  So I'm considering writing the the SSA to request a certificate, just to cover my bases as the 15 Oct deadline is approaching.

 

I found this information that suggested the SSA would provide a document I can use if I cannot obtain one from a foreign government.  Has anyone done this successfully?  Here is the info:

If the foreign country will not issue the certificate, you should request a statement that your income is not covered by the U.S. social security system.  Request it from the U.S. Social Security Administration.  Attach a photocopy of either statement to your Form 1040 each year you are exempt from U.S. self-employment tax.

https://www.irs.gov/individuals/international-taxpayers/social-security-tax-consequences-of-working-abroad

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Last year I sent my request to the Berlin office on March 26, they mailed the D/USA 101-A on May 30.  So you could wait a little longer.  And I just realized I didn't send my request for 2018 yet.

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My mistake, I did sent the request for 2018 on April 8 this year, just couldn't find the record.  I haven't received any response yet.

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ok, good to know, thank you!  I think I will just file with this statement (I made it up, so no idea if it's good):

 

Quote

 

My income is subject to the German social security system.  According to the totalization agreement between USA and Germany, my income is therefore not covered by the U.S. social security system.  I have requested a "certificate of coverage" from the German social security system with no response.  I will amend my return when I have received the appropriate certificate.


 

and send the certificate as an amendment later. 

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For future reference, after another phone call, I have discovered the following:

 

The Deutsche Rentenversicherung Nord (in Hamburg) has nothing to do with sending this form (D/USA 101-A).  If they receive these requests, they send them to Berlin:

 

Deutsche Rentenversicherung Bund

Postfach 10704

Berlin

 

So she told us to resend the letter directly to Berlin ourselves just in case.  And she said the office in Berlin doesn't provide much information over the phone, even to them, so don't bother calling.  It seems that last time when I thought we had spoken to the Hamburg office, it was a general Deutsche Rentenversicherung info number.  This time we actually spoke to the Hamburg office.

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Hi there. Reviving this thread with the hope someone might have some intel or experience on an adjacent IRS issue. For the tax years 2017 and 2018, I did my filing with the IRS myself (2014 through 2016 were with an accountant). I am far below the earning threshold where the US double taxation kicks in, and amazingly given what others have had to deal with in this thread, they don't seem to be chasing me around for proof of paying into the German pension system. (Though I am indeed paying in through the KSK.) Instead, I returned from a Christmas trip home to a letter from the IRS dated November 15th, demanding a response within 30 days but which was clearly not received by me in Germany until mid-December at the earliest, claiming my Schedule C was incomplete (I checked what I mailed them, it wasn't as far as I can tell) and wanting to know how I calculated Line 12 on Schedule 1 (business income). Well, I calculated that number by adding up what I earned and putting it on the form...so I am at something of a loss here. 

 

Has anyone dealt this kind of thing before? Just tried calling the IRS after wending my way through the labyrinth to a human, she said their systems were down as part of a planned outage through the beginning of January. Very helpful. She also couldn't even tell me if there are fees associated with furnishing this requested information "late," though the lateness is clearly their fault, not mine. Anyway, any advice would be much appreciated! I know the first piece of advice I'll probably receive is "get an accountant," but considering I owe the IRS nothing in the first place, I'd like to try to deal with this on my own. Any relevant experience? Words of wisdom? Thank you!

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On 12/30/2019, 4:26:08, susede said:

Hi there. Reviving this thread with the hope someone might have some intel or experience on an adjacent IRS issue. For the tax years 2017 and 2018, I did my filing with the IRS myself (2014 through 2016 were with an accountant). I am far below the earning threshold where the US double taxation kicks in, and amazingly given what others have had to deal with in this thread, they don't seem to be chasing me around for proof of paying into the German pension system. (Though I am indeed paying in through the KSK.) Instead, I returned from a Christmas trip home to a letter from the IRS dated November 15th, demanding a response within 30 days but which was clearly not received by me in Germany until mid-December at the earliest, claiming my Schedule C was incomplete (I checked what I mailed them, it wasn't as far as I can tell) and wanting to know how I calculated Line 12 on Schedule 1 (business income). Well, I calculated that number by adding up what I earned and putting it on the form...so I am at something of a loss here. 

 

Has anyone dealt this kind of thing before? Just tried calling the IRS after wending my way through the labyrinth to a human, she said their systems were down as part of a planned outage through the beginning of January. Very helpful. She also couldn't even tell me if there are fees associated with furnishing this requested information "late," though the lateness is clearly their fault, not mine. Anyway, any advice would be much appreciated! I know the first piece of advice I'll probably receive is "get an accountant," but considering I owe the IRS nothing in the first place, I'd like to try to deal with this on my own. Any relevant experience? Words of wisdom? Thank you!

 

Particularly hoping @Straightpoop might be able to advice whether it's all right to deal with this myself, or better to get an accountant.

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