Benefits of a Totalization Agreement for US Social Security Tax

Totalization Agreement for US Social Security Contributions

For some US Persons who reside overseas or work for a Foreign Employer, they may get stuck with paying tax twice for Social Security. On the one hand, as a US Person, they are required to pay tax into the US Social Security system in the United States, and on the other hand, if they are working outside of the United States and/or for a foreign employer — then they may also be required to pay tax into the foreign jurisdictions tax system (sometimes referred to as Pillar 1). This is typically an issue when the individual is self-employed and therefore is responsible for both the employer and employees portion of the payments. Luckily though, some taxpayers may be able to avoid the double-taxation issue for Social Security because the United States may have entered into a totalization agreement with that other country. The totalization agreement limits double taxation in situations in which a US person or vice versa works for a foreign country employer. Unfortunately, there are less than 30 totalization agreements (currently 27) so the US has not entered into one of these agreements with each country —

Totalization Agreements Explained

As provided by the IRS:

• • • The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be considered when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country.

    • A list of countries with whom the United States currently has totalization agreements and copies of those agreements may be obtained at U.S. International Social Security Agreements.

    • Telephone inquiries should be directed to the numbers shown on the following page: Office of Earnings and nternational Operations – Contact Us by Phone.

    • If you live outside the United States, you may obtain more information on the Social Security Administration’s Office of International Operations website.

    • The Social Security Administration also publishes small brochures which concisely describe the terms of each Totalization Agreement… In addition, the complete text of these brochures and of the Totalization Agreements themselves are available on the Social Security Administration’s International Agreements website.

    • Any alien who wishes to claim an exemption from U.S. Social Security taxes and Medicare taxes because of a Totalization Agreement must secure a Certificate of Coverage from the social security agency of his home country and present such Certificate of Coverage to his employer in the United States, according to the procedures set forth in Revenue Procedures 80-56, 84-54, and Revenue Ruling 92-9.  An alternate procedure is provided in these revenue procedures for an alien who is unable to secure a Certificate of Coverage from his home country.

Which Countries Have a Totalization Agreement with US?

The following is a list of foreign countries out of entered into a totalization agreement with the United States:

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