I am self-employed living overseas. Can I use Turbotax to file my taxes?

[cramc03]

Also, can Turbotax help advise me on whether I need to take a foreign tax credit or a foreign earned income exclusion? Are both possible with Turbotax? Thanks.

[LinaJ2018]

Yes, if you are a US citizen or resident wanting to file US taxes, you can use TurboTax even though you live overseas.  After entering your information, the program will help you figure out if you qualify for the foreign income exclusion and calculate your foreign tax credit accordingly.

Per IRS, if you lived outside United States for at least 330 days during 12 consecutive months, you might be able to exclude your foreign income from your taxes.  For more information, see  Foreign income and exclusion and Extension.  For tax year of 2016, the maximum foreign earned income exclusion amount is $101,300.  After the exclusion, If you pay foreign taxes to both US and the foreign government on the same amount of income, you can take a foreign tax credit. To avoid double dip, do not use exclusion and tax credit on the same amount of income.

To enter foreign earned income / exclusion in TurboTax online program:

1. After sign into your account, select Take me to my return 

2.  At the right upper corner, in the search box , type in foreign income and Enter 

3.  Select Jump to foreign income 

4.  Next screen, Did You Make Any Money Outside the United States? answer Yes 

5.   On screen, What Form(s) Was Foreign Income Reported On ?check the third box and continue to proceed.

 To enter form 1116, foreign tax credit :

1. After sign into your account, select the orange buttonTake me to my return

2.  At the right upper corner, in the search box , type in foreign tax credit and Enter

3.  Select the 1st choice on the search results - Jump to foreign tax credit 

4.  Start with screen Foreign Taxes and select Continue  to follow prompts.

[jebekhazi]

If you are self employed in a foreign country you are still required to pay the SS and Medicare self employed tax. Turbo tax does not do that.

[SusanY1]

LinaJ2018 gives a very good description of how to enter the data into the TurboTax program to calculate either the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit. TurboTax will allow you to choose either of these methods, or in some situations combine them and the IRS allows you to select the method that gives you the best outcome.  The program cannot, however, guide you to which of those options is the right one for you.  Taxes on foreign income for US citizen's can be pretty complex but once you know which option works best for you, TurboTax can certainly assist you in filing your return correctly.  I can't cover all of the possible options related to foreign earned income in one post but I will try to cover the most common situations in hopes that you can apply one of these to your current situation.  

Most folks who work overseas will be familiar with the FEIE and will default to this method, but it isn't always the best choice. 

Here are a few scenarios when using the foreign tax credit makes the most sense:

• The taxpayer has dependent children aged 16 or younger who have a social security number (important note: this number must have been issued by the filing deadline of the tax return being filed, including extensions, and cannot be an ITIN).  Taxpayers with dependents who qualify for the child tax credit are eligible for the refundable portion of this credit of up to $1,000 per child if there is any taxable income shown on the tax return.  The FEIE can reduce the taxable income to zero thereby disallowing the child tax credit (which requires some taxable income).  
• The taxpayer is working in a high tax bracket in the foreign country but anticipates a lower tax bracket in that country in the future.  Unused foreign tax credits can be carried forward for use in future years (against other foreign income) and sometimes this can be beneficial to the taxpayer.
• The taxpayer doesn't yet meet the physical presence or bona fide resident test and doesn't want to extend the tax return filing deadline to do so.

Now, here are a few scenarios where the foreign earned income exclusion makes the most sense:

• The taxpayer is working in a country where there is no income tax or where the income tax rates are lower than the US rates on the same income.
• When the taxpayer has taken the foreign earned income exclusion previously.  When you file your first return using the FEIE, you make a formal "election" to use this method of calculating tax on your foreign earned income.  You must then take it in every subsequent year that you have foreign earned income unless you revoke the election.  You may want to revoke the election in favor of taking the foreign tax credit but if you revoke this election you cannot use this method again for 5 years unless you first request permission from the IRS in the form of a Private Letter Ruling.  

These reasons are not exhaustive and taxes for US citizens residing and working outside of the US can be complicated by a wide variety of other factors, but hopefully these suggestions will give you some things to think about when making your choice.  The TurboTax program can calculate the exclusion or the credit and hopefully this additional guidance will assist you in determining the option that is best for your personal situation.  

If you would like additional information on topics related to citizens living abroad, the IRS has a wealth of related information available HERE.

[yannarki]

Turbotax does not really offer filling from abroad because they only accept credit cards with a US address to pay for their fees. This is a bit illogical for them to advertise that they support it when our banks need to have our address (abroad) on file...

[KarenJ2]

We accept credit, debit, and pre-paid cards with a Visa, MasterCard, American Express, or Discover logo. Like many other U.S. online merchants, we can only process cards with a U.S. billing address. 

If you do not have a US billing address, perhaps you have a friend or relative in the US that could assist you.

You can take either the foreign earned income exclusion or the foreign tax credit, or both if your income is higher than the exclusion.

To report foreign self-employment income in TurboTax:

1. Start by filling out a full schedule C the same as you would as if you were working in the US.  List all your income, all your expenses, and calculate your net profit.  
2. If you are going to use the foreign earned income exclusion, enter your foreign source net profit as foreign earned income, it would be eligible for the foreign earned income exclusion.

Please remember that unless you work in a country with a totalization agreement and pay social security in that country and have a certificate of coverage, you will owe self-employment taxes. on your income.  The exclusion is only for income tax.

[jensakut]

sorry I mixed something up. everything is fine filing taxes for expats.

[MaryK4]

Yes, but you must have a U.S. address and credit card with U.S. address.

@jensakut

[LTLB]

This is misleading. You do NOT need to pay US self-employment Social Security taxes if you are an expat abroad and you pay the self-employment taxes in the country where you live. I live in France and pay 22% self employment taxes on my earnings. The Totalization agreement between France and the USA means that I do NOT need to pay the 15% US self-employment tax because that is called "double taxation". Below is information from the irs.gov website explaining this concept. 

International Social Security Agreements

The United States has entered into social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries.  These agreements are commonly referred to as Totalization Agreements.  Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated.  The agreements generally make sure that social security taxes (including self-employment tax) are paid only to one country. 

If your self-employment earnings should be exempt from foreign social security tax and subject only to U.S. self-employment tax, you should request a certificate of coverage from the U.S. Social Security Administration, Office of International Programs.  The certificate will establish your exemption from the foreign social security tax.  You can get more information about the Totalization Agreements on the Social Security Administration's web site.

To establish that your self-employment income is subject only to foreign social security taxes and is exempt from U.S. self-employment tax, request a certificate of coverage from the appropriate agency of the foreign country.  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.  Also print “Exempt, see attached statement” on the line for self-employment tax.

See the “Self-Employment Tax” information in IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for more detailed information about self-employment tax for U.S. citizens and residents abroad.

[rodgerse11]

Thank you so much.  This was extremely helpful. I did the calculations both ways to determine which option is likely best for me over these next few years. 

I do believe that the writer above is correct as I do not see anywhere on my USA return where the mandatory 15.3% self employment  tax on foreign income is added to my USA taxes.  Thanks, Elaine

[rodgerse11]

Yes. I have been struggling with this omission in the program also.

[rodgerse11]

I have been confused by this.  Since I am 62 years old, I plan to draw on my American social security in 4 years. If I get a certificate to stop paying my American social security tax because I currently pay European social security tax, does that mean I can not claim my American social security when I need it?

[heavypedals]

I am an American citizen living and working abroad. I completed all of the information correctly and entered my foreign home address. At the end of the Turbotax FILING area it asks for an American address for registration. I don't have an American address, just the foreign address I typed in earlier, and I cannot continue with filing. I am stuck. Any suggestions? 

[ToddL99]

Go back to the Personal Info section (Mailing address) and temporarily change it to a U.S. address (a relative or friend). Complete the registration and change your address back to the foreign address before filing.

If this is an issue with MAX benefits or paying your fees, please update this post with additional information.

[Frustrated Canadian]

Preach, I don't know why they make it so hard to accept my money