Self-employment income is income that arises from the performance of personal services, but which cannot be classified as wages because an employer-employee relationship does not exist between the payer and the payee. The Internal Revenue Code imposes self-employment tax on the self-employment income of any individual who is a U.S. citizen or a U.S. resident within the meaning of Internal Revenue Code (IRC) section 7701(b)(1)(A) and has such self-employment income. The Internal Revenue Code does not impose self-employment tax on the self-employment income of an individual who is neither a U.S. citizen nor a U.S. resident within the meaning of IRC section 7701(b)(1)(A), unless the self-employment tax liability is imposed under the terms of a Totalization Agreement. However, once such an individual becomes a U.S. resident under the residency rules of the Code, they become liable for self-employment taxes under the same conditions as an individual who is a U.S. citizen or a U.S. resident within the meaning of IRC section 7701(b)(1)(A). In certain cases, compensation for personal services is not considered wages for the purposes of Social Security and Medicare tax withholding. For U.S. citizens who are employed by a foreign government or an international organization, the income received for such services is reportable as self-employment income and is subject to self-employment tax to the extent that such services are performed within the United States, even though an employer-employee relationship may exist between the payer and the payee of the income. References/Related Topics Social Security Tax / Medicare Tax and Self-Employment Internal Revenue Code Sections 1402(b) and 1402 (c)(2)(C) and the Regulations thereunder. Internal Revenue Code Section 3121 (b)(11), (b)(12), and (b)(15) and the Regulations thereunder. Service Center Advice SCA 199932003, August 13, 1999 Field Service Advice 2000 FSA LEXIS 239, REFERENCE: CC:EBEO:TR-45-2115-95, Br2:AGKelley, September 29, 2000 Persons Employed in a U.S. Possession/Territory – Self-Employment Tax Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.