I am self-employed and all of my income is excluded under the Foreign Earned Income Exclusion. Why does my return show a balance due?
Self-employed taxpayers must pay self-employment tax on their net business income based on the IRS’ current rates, unless you are in a country with a Totalization Agreement. For 2017, the Social Security tax rate is 6.2 percent of the first $127,000 you earn during the year. If you’re self-employed, this means you must pay a 12.4 percent Social Security tax (consisting of payments both as an employee and employer). The Medicare tax rate for 2017 is 1.45 percent, so self-employed taxpayers must pay a 2.9 percent tax. This tax applies to all of the income you earn during the year. You will need to pay estimated self-employment taxes on a quarterly basis to avoid interest and penalties.
All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.