How to File Self-Employment Tax as a US Expat (Step-by-Step) 

The IRS collected over $148 billion in self-employment taxes in 2024, with expat contributions representing a growing portion as more Americans work abroad. Whether you’re filing for the first time as an expat or need to catch up on missed returns, this step-by-step guide walks you through the exact process of reporting foreign self-employment income correctly. 

The Complete Process: Filing self-employment tax as a US expat requires Form 1040, Schedule C (business income), Schedule SE (self-employment tax), and potentially Form 2555 (FEIE). You’ll need to convert foreign currency to USD, calculate net business income, apply the 15.3% self-employment tax rate, and may need to make quarterly estimated payments. The process is manageable when you follow the proper sequence. 

Most expats who attempt this process alone make costly errors with currency conversion, timing of income recognition, or missing required forms. This guide eliminates the guesswork and provides the exact steps tax professionals use. 

What Forms Do I Need for Self-Employment Tax? 

Before starting, gather these required forms and documents: 

Core Tax Forms: 

• Form 1040: US Individual Income Tax Return 
• Schedule C: Profit or Loss from Business (Sole Proprietorship) 
• Schedule SE: Self-Employment Tax 
• Form 2555: Foreign Earned Income (if claiming FEIE) 

Additional Forms (If Applicable): 

• Form 5471: Information Return of US Persons with Foreign Corporations 
• Form 8938: Statement of Specified Foreign Financial Assets 
• Form 1116: Foreign Tax Credit 
• FinCen Form 114: Foreign Bank Account Reporting
• Schedule B: Interest and Ordinary Dividends 

Supporting Documentation: 

• Bank statements in foreign currency 
• Invoice records and payment confirmations 
• Business expense receipts 
• Foreign tax documents 
• Currency exchange rate documentation 
• Certificate of Coverage (if claiming totalization agreement exemption) 

Step 1: How Do I Convert Foreign Currency to USD? 

All amounts must be reported in US dollars using the appropriate exchange rates for when income was earned or expenses were incurred. 

Exchange Rate Rules: 

• Use the daily exchange rate when the income was received 
• For expenses, use the rate when the expense was paid 
• The IRS accepts rates from Treasury.gov or other reliable financial sources 
• For simplicity, many expats use average annual rates for recurring monthly income 

Currency Conversion Example: Marcus, a consultant in Germany, received €5,000 in March 2025 when the EUR/USD rate was 1.08. 

• USD Income = €5,000 × 1.08 = $5,400 

Step 2: How Do I Complete Schedule C for Foreign Income? 

Schedule C reports your business profit or loss, which becomes the basis for your self-employment tax calculation. 

Income Section (Part I): 

• Line 1: Gross receipts or sales (total USD income received) 
• Line 7: Gross income (typically the same as Line 1 for service businesses) 

Expense Section (Part II):

Common expat business expenses include: 

• Home office expenses (if working from home abroad) 
• Professional development and training 
• Business equipment and software 
• Internet and phone costs (business portion) 
• Travel expenses for business purposes 
• Professional memberships and subscriptions 

Key Calculations: 

• Line 31: Net profit or loss (Line 7 minus total expenses) 
• This amount flows to Form 1040 and Schedule SE 

Step 3: How Do I Calculate Self-Employment Tax on Schedule SE? 

Schedule SE determines your self-employment tax liability. 

Section A (Short Schedule SE) – Most Common: 

• Line 2: Net earnings from self-employment (from Schedule C, Line 31) 
• Line 3: Multiply Line 2 by 92.35% ($100,000 × 0.9235 = $92,350) 
• Line 4: Self-employment tax: Line 3 × 15.3% ($92,350 × 0.153 = $14,130) 
• Line 6: Deduction for one-half of self-employment tax (Line 4 × 0.5 = $7,065) 

Section B (Long Schedule SE) – Required If: 

• Your net earnings exceed $147,000 
• You had a church employee’s income 
• You’re claiming an exemption under a totalization agreement 

Real-World Calculation: Elena, a freelance translator in Barcelona, has net self-employment income of $85,000: 

• Net earnings subject to SE tax: $85,000 × 92.35% = $78,498 
• Self-employment tax owed: $78,498 × 15.3% = $12,010 
• Deductible portion: $12,010 ÷ 2 = $6,005 

Step 4: How Does FEIE Affect Self-Employment Tax? 

If claiming the FEIE, complete Form 2555 before finalizing your tax calculations. 

Critical Point: FEIE excludes income from federal income tax but not from self-employment tax. You’ll still owe the full 15.3% on your business income. 

Form 2555 Key Sections: 

• Part II: Bona Fide Residence Test (if applicable) 
• Part III: Physical Presence Test (if applicable) 
• Part IV: All Foreign Earned Income 
• Part VII: Foreign Earned Income Exclusion Calculation 

Income Allocation: If you have both self-employment and W-2 income abroad, allocate the FEIE strategically. Many expats apply it first to W-2 income to maximize the benefit. 

Step 5: How Do I Claim Totalization Agreement Exemptions? 

If you’re in a totalization agreement country and paying into the local social security system, you may qualify for an exemption from US self-employment tax. 

Required Documentation: 

• Certificate of Coverage from your host country’s social security administration 
• Proof of contributions to the foreign system 
• Completed Schedule SE with exemption notation 

How to Claim the Exemption: 

1. Complete Schedule SE through Line 3 
2. Write “Exempt-Totalization Agreement” on Line 4 
3. Enter zero for self-employment tax 
4. Attach the Certificate of Coverage 
5. Include a brief statement explaining the exemption 

Countries with Self-Employment Exemptions: Spain, Canada, Germany, and several others have specific provisions for self-employed individuals. Each agreement has unique requirements. 

Step 6: When Do I Make Quarterly Estimated Payments? 

Self-employed expats typically must make quarterly estimated tax payments to avoid penalties. 

Payment Due Dates for 2025: 

• Q1: April 15, 2025 
• Q2: June 16, 2025 (extended due to June 15 falling on Sunday) 
• Q3: September 15, 2025 
• Q4: January 15, 2026 

Calculation Method: Pay 25% of your expected annual self-employment tax liability each quarter, or 100% of last year’s tax (110% if your prior year AGI exceeded $150,000). 

Payment Options: 

• EFTPS (Electronic Federal Tax Payment System) 
• Form 1040ES with check 
• Credit card or bank transfer (fees apply) 
• Wire transfer from foreign banks 

Step 7: How Do I Assemble Form 1040? 

Bring all components together on your main tax return: 

Form 1040 Key Lines: 

• Schedule 1, Line 3: Business income or loss (from Schedule C) 
• Schedule 2, Line 4: Self-employment tax (from Schedule SE) 
• Schedule 1, Line 15: Self-employment tax deduction (half of SE tax) 

Attachment Order: 

1. Form 1040 
2. Schedule 1 (if applicable) 
3. Schedule 2 (if applicable) 
4. Schedule C 
5. Schedule SE 
6. Form 2555 (if claiming FEIE) 
7. Supporting statements and documentation 

What Are Common Currency Conversion Mistakes? 

Proper currency conversion is critical and often overlooked. Here are the specific requirements: 

Income Recognition Timing: 

• Cash basis: Convert when payment is received 
• Accrual basis: Convert when income is earned 

Monthly Average vs. Daily Rates: For consistent monthly income (like retainer fees), you may use monthly average rates. For irregular payments, use daily rates. 

Documentation Requirements: 

• Source of exchange rates used 
• Dates of conversion 
• Calculations showing foreign currency × rate = USD amount 

What Filing Mistakes Should I Avoid? 

• Currency Conversion Errors: Using year-end rates instead of transaction-date rates can significantly distort your income and create compliance issues. 
• Missing Quarterly Payments: Failing to make estimated payments can result in penalties, even if you ultimately owe no tax due to FEIE. 
• Incorrect Schedule SE Completion: Using gross income instead of net income, or failing to apply the 92.35% factor. 
• Mixing Business and Personal Expenses: Only legitimate business expenses are deductible. Personal living expenses abroad are not business deductions. 
• Late Filing: Even with the automatic two-month extension for expats, late filing incurs penalties and interest. 

What About Special Situations? 

• Multiple Country Income: If earning self-employment income in multiple countries, report all income on a single Schedule C but maintain separate records by country. 
• Partnership Income: If you’re a partner in a foreign partnership, you may need to file additional forms, and the income might flow through differently. 
• State Tax Considerations: Most states don’t recognize FEIE exclusions, so your excluded federal income may still be subject to state tax if you maintain state residency. 

What’s My Filing Timeline? 

January – March: 

• Gather all documentation 
• Convert foreign currency amounts 
• Complete preliminary calculations 
• Organize supporting documents 

April – June: 

• Complete and file your return (remember expats get an automatic extension to June 15) 
• Make any required quarterly payments 
• Address any immediate issues or questions 

Year-Round: 

• Maintain organized records 
• Track exchange rates for major transactions 
• Set aside taxes from each payment received 
• Monitor changes in tax laws affecting expats 

When Should I Get Professional Help? 

Consider professional assistance if you have: 

• Multiple income streams across different countries 
• Complex business structures or partnerships 
• Significant foreign assets requiring additional reporting 
• Questions about totalization agreements 
• Previous compliance issues or unfiled returns 

Peace of Mind Through Expert Guidance 

Filing self-employment tax as a US expat involves multiple complex forms, currency conversions, and timing requirements. A single mistake can result in penalties, interest, or missed opportunities for legitimate tax savings. 

Greenback is an American company founded in 2009 by US expats for expats. We focused exclusively on expat taxes and always have. Many of our CPAs and Enrolled Agents are expats themselves, and because they live in 14 time zones, they experience firsthand the challenges of self-employment abroad. They have the knowledge and patience to help you manage the complicated US tax system and your local rules. 

If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.

This article provides general guidance on filing procedures and should not be considered specific tax advice. Self-employment tax rules and forms can change, and individual situations vary significantly. We recommend consulting a qualified tax professional familiar with expat tax issues to guide you in specific circumstances.