If you are foreign, self-employed, and your net earnings (income minus expenses) are more than $400, you need to file and pay self-employment tax. Paying in is necessary to receive credit toward Social Security benefits.
If you are a U.S. citizen or a resident alien of the United States and you live outside the U.S., you are taxed on your worldwide income. However, you may qualify to exclude from your income an amount of your foreign earnings that is adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, and $97,600 for 2013). In addition, you can exclude or deduct certain foreign housing amounts.
A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income. The excluded amount will reduce your regular income tax, but will not reduce your self-employment tax.
Additionally, if you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR).
As of 2013, United States persons are required to file an FBAR if:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
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