Self-Employment Tax for US Citizen Living Abroad - Do I Still Owe?

I'm a US citizen who's lived in Germany my entire life. Growing up, my dad always talked about the double taxation issue for Americans abroad, but he used the Foreign Earned Income Exclusion, which I assumed would cover everything tax-related for me too. Well, I just discovered there's apparently nothing comparable for self-employment taxes (social security and Medicare)? These still have to be paid by US citizens abroad from what I'm learning, and I'm kind of freaking out because I've been earning some money from freelance design work over the past couple years. I've been making around $380-400 per month from various clients between 2022-2024, and have never filed or paid any US taxes (I do pay taxes here in Germany). How do I figure out what I owe now, including any penalties and interest? And is there any statute of limitations for these taxes that might help me? I'm worried this is going to be a complete nightmare to sort out.

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18 comments

Dana Doyle

•8M

You're right to be looking into this now rather than later! The Foreign Earned Income Exclusion (FEIE) only applies to income tax, not self-employment tax. Self-employment tax is essentially your contribution to US Social Security and Medicare, and unfortunately, there's no general exclusion for Americans living abroad. For your situation with income around $380-400 monthly, you'll need to file Schedule SE with your tax return. The self-employment tax rate is about 15.3% on your net earnings. You'll need to file for each year you had self-employment income, and you should file Form 1040 along with Schedule C to report your business income and expenses. As for statute of limitations - it's generally 3 years from the filing date, but this only starts once you actually file. If you never filed, the clock hasn't started ticking.

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Dana Doyle

•8M

Yes, once they file their past-due returns, the 3-year statute of limitations clock will start ticking from that filing date. There is indeed a totalization agreement between the US and Germany that might help in this situation. If they're paying into the German social security system, they may be able to avoid paying US self-employment tax. They would need to obtain a certificate of coverage from the German authorities to prove they're contributing to the German system. It's definitely worth looking into this option before paying any US self-employment taxes.

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Manny Lark

•8M

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Manny Lark

•8M

The accuracy was surprisingly good. I ended up owing almost exactly what it estimated. The key difference from other tools is that it's specifically designed to catch international tax nuances rather than just domestic situations. It handles Totalization Agreements really well actually. It knows the specific provisions for different countries, including the Germany-US agreement. It flagged exactly what documentation I needed from the Spanish authorities to claim exemption from US self-employment tax, and even provided template language for requesting the certificate of coverage. That alone saved me thousands in SE tax that other tools would have just told me to pay.

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Rita Jacobs

•8M

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Ben Cooper

•8M

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Ben Cooper

•8M

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•8M

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Darren Brooks

•8M

That's right - if your net self-employment income (after expenses) is below $400 for the year, you generally don't owe any self-employment tax for that year. As for whether you need to file at all, that depends on your total income from all sources. For US citizens living abroad, you still need to file a US tax return if your total income exceeds the standard filing thresholds, even if you don't owe any tax due to the Foreign Earned Income Exclusion or foreign tax credits. But if your only US reportable income is below-threshold self-employment income, you might not have a filing requirement. Just be sure to keep good records in case you ever need to prove this.

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