u.s. expat tax guide – ireland
What should US expats know about self-employment in Ireland?
For Americans living in Ireland and working for themselves, whether as freelancers, contractors, or small business owners, self-employment means taking charge of your tax responsibilities both in Ireland and the US.
How does Ireland tax self-employed US citizens?
If you’re self-employed in Ireland, you’re required to pay your own income tax, the Universal Social Charge (USC), and Pay Related Social Insurance (PRSI).
Unlike employees whose taxes are automatically deducted, you’ll need to handle this through the Irish tax system by filing an annual return, specifically using Form 11.
Additionally, as a US citizen, you must report your global income—including what you earn in Ireland—to the IRS.
Fortunately, the US-Ireland tax treaty and provisions like the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC) help prevent double taxation on this income.
How should Irish self-employment income be reported to the IRS?
Your self-employment earnings from Ireland must be included on your US tax return.
This is done using Schedule C on Form 1040, and if your business is considered a foreign branch, Form 8858 must also be filed.
Filing Form 8858 on time is essential to avoid penalties, which can be as high as US$10,000 for late submissions.
Are US self-employment taxes applicable to Irish earnings?
Typically, no.
After living in Ireland for over two years, your social security contributions go towards the Irish system (PRSI) rather than US Social Security.
Thanks to the Totalization Agreement between the US and Ireland, you won’t be required to pay social security taxes in both countries. This agreement ensures your contributions count towards your benefits under Ireland’s social welfare system.
What are the steps for filing taxes as a self-employed American in Ireland?
- Register with Revenue Online Service (ROS): This system allows you to file taxes and manage payments online.
- Complete and submit Form 11: This form is necessary for declaring your income and claiming any relevant deductions or tax credits.
- Maintain thorough records: Keeping detailed records of all income and business-related expenses is crucial for accurate tax filing and for any potential audits.
- File by the October 31 deadline: Ensure your taxes are filed by this date to avoid any penalties for late submissions.
Are there deductions and credits that can reduce your tax bill?
Yes, there are. Self-employed individuals in Ireland can benefit from several deductions that lower taxable income:
- Business Expenses: Costs directly related to running your business, such as equipment, supplies, and travel, can be deducted.
- Home Office Costs: If you work from home, you may be able to deduct a portion of your utilities and internet costs.
- Retirement Contributions: Contributing to a personal retirement plan can also reduce your taxable income, providing tax relief while planning for your future.
How does the US-Ireland tax treaty affect your taxes?
The tax treaty between the US and Ireland ensures that your self-employment income is generally taxed only in Ireland, helping to avoid double taxation.
If your business activities extend to the US, you may owe taxes there, but you can usually offset this with the Foreign Tax Credit (FTC).
