Barron's International Tax Service

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Social Security

Under Totalization Agreements dual taxation for the same work are eliminated.  The implication is that one or the other country of employment requires that you pay Social Security taxes.  In either case you should obtain a certificate or statement from the proper authority that states whether the United States or the foreign country subjects you to pay Social Security.  In the event you are self-employed and your taxable income is eliminated by the Foreign Earned Income Exclusion, you would still have to pay Social Security taxes to the Internal Revenue Service.   Where the foreign country requires self-employed persons to pay Social Security, these persons will be covered by the social security system where they reside.  Members of the clergy can receive exemption from Social Security is they conscientiously oppose public insurance for religious reasons.

In order to qualify at retirement age for a Social Security pension, retirees must have paid a minimum amount of Social Security taxes for 40 quarters (10 years).  To ascertain whether you will qualify and for what amount of pension you will receive, file Form SSA-7004-SM, available at www.ssa.gov, with:

                                        SOCIAL SECURITY ADMINISTRATION
                                        P.O. Box 1756
                                        Baltimore, MD 21235-8101

Totalization agreements also assure that anyone working under the Social Security system of a foreign country who lacks 40 quarters with the Social Security Administration of the United States can make up those quarters.  However the eventual U.S. social security pension will be averaged downward according to the qualifying quarters obtained from employment in the foreign country.

Non-resident alien retirees who qualify for U.S. Social Security but who do not have their Green Card will find their pensions reduced by a flat tax of 30% for U.S. taxes.  Those same retirees who do have their Green Cards but whose pensions have been flat taxed may file a Form 1040 to recover those taxes.