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Topic: Self-Employed and Utterly Confused  (Read 1344 times)

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Self-Employed and Utterly Confused
« on: March 31, 2020, 02:26:00 AM »
Here are the basics:
Self-employed, married filing separately
Left the US March 20th, 2019
Made under $500 while in US
Made under $6000 while in the UK

Will I really end up paying about $880 in taxes to the US? Because that's what TurboTax is telling me, and it just seems a bit... ridiculous?
Does the Foreign Earned Income Exclusion not cover this?
Am I just hopelessly lost in a quagmire of schedules and forms? (The answer is yes for that one.)

Thank you to anyone who can shed some light on this for me. I've always done my taxes and never had an issue. But now I just feel incredibly overwhelmed and confused.


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Re: Self-Employed and Utterly Confused
« Reply #1 on: March 31, 2020, 09:01:45 AM »
That seems wrong. According to Taxcaster you should not be paying any taxes. I just tried it with income $6,500.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

I believe FEIE is only for earnings from a job, equivalent to W2 wages. To claim back foreign taxes paid on your US return you would use foreign tax credits form 1116
Dual USC/UKC living in the UK since May 2016


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Re: Self-Employed and Utterly Confused
« Reply #2 on: March 31, 2020, 09:59:08 AM »
Something is wrong there.  The Standard Deduction for a single person is I believe $12,200. You haven't earned enough to pass that amount. You cannot use the standard deduction if married filing singly AND the other spouse itemizes.

https://www.irs.gov/taxtopics/tc551

For Self-Employed, see

https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center


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Re: Self-Employed and Utterly Confused
« Reply #3 on: April 06, 2020, 06:29:01 PM »
I'm self-employed as well and filed with TurboTax last year. I ended up owing $3,800 in self-employment tax to the IRS (according to TurboTax), but this was WRONG and I'm now having a nightmare time trying to amend and get my money back. Turbo Tax can understand the Foreign Earned Income Exclusion but doesn't factor in the Totalization Agreement between the US and UK, which says that if you're paying the equivalent of social security (which is was self-employment tax is) in one country, you're exempt from paying it in the other. I'm guessing you pay National Insurance in the UK, which means you're exempt from US self-employment tax. Here are some informative links from the IRS:
https://www.irs.gov/individuals/international-individuals
https://www.irs.gov/individuals/international-taxpayers/totalization-agreements

I recommend using another tax service! MyExpatTaxes or TaxesForExpats are both more expensive than TurboTax, but WAY more user-friendly for our particular situation! Good luck!
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