Foreign Earned Income + 1099 + Schedule SE

I've lived outside the US a number of years and regularly filed US tax returns (as required for a USC) - after filing

2555 to exclude foreign earned income its been pretty straightforward so far. Last year I did some contract work on a 1099 basis for an US employer - it was remote work not done in the US. When I figure the taxes 1040 + Schedule C + 2555 and Schedule SE seems I would owe SE taxes. I must be missing something to end with paperwork which shows I would owe taxes when I'm already paying income tax and social security tax in my tax home. What am I missing here - what do I need to research/file to avoid double payment of soc. sec. stuff when I have self-employment income??

-F

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I know this is probably too late to help before you file your 2005 return, but you can always amend or take this into consideration for 2006. The US has bilateral social security treaties with about 20 or so other countries designed to avoid this problem. The treaties provide that social taxes are paid in only one country, and which country depends on a number of factors. Typically, for self employed individuals, the taxes are paid only in the country of RESIDENCE, so you would not be liable for self-employment tax. What is typically required is that you obtain a "certificate of coverage" from you home country indicating that you are covered by their social security system. I believe the instructions are to attach a copy of that certificate to your return each year, but we generally just note the effective date of that certificate in a footnote to the tax return. You didn't say what country you live in, so I can't tell whether there is a treaty, but the text of each the treaties, as well as a pamphlet explaining them in plain English, can be found at

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or more specifically at

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If you are not in a treaty country then you end up paying social taxes in both countries.

-- Bruce E. Cobern, CPA mailto: snipped-for-privacy@pipeline.com