From ftmexpat@netcom.com Sun Apr 10 11:54:32 EDT 1994 rticle <1994Apr1.162934.1911@MITL.Research.Panasonic.COM>, Andrew Grant wrote: >In article <1994Mar31.104109.5184@muvms6>, desaid@muvms6.wvnet.edu writes: >|> HI : >|> >|> I am on H1-B visa and I have applied for LC. Present employer is >|> deducting social security tax. Am I suppose to pay this social >|> security tax or shall I ask them not to withold the tax. >|> >|> >You should pay the tax. H1-Bs have to pay Social Security unless they ^^^ ^^^ >pay it in their home country and a tax treaty exists between the US ^^^ ^^^^^^ ^^^^^^ >and their country. > >-- >Andrew D.Grant >grant@KMERL.Panasonic.OM Hello I'm glad Andrew Grant mentioned this point. I won't comment on the U.S. tax treaty treatment of social security type tax because I don't know much about it. I'll comment on the "Social Security Totalization Agreements" that unlike the tax treaties are Executive Agreements that don't need the "advice and consent to ratification" of the Senate to be enacted, even though (I think) they can be objected to by either house of Congress if they do so within 60 session days after it's signed by the Executive Branch. See below to see what IRS publications 519 and 54 say about what I've always called Social Security Totalization Agreements. I assume that people in the U.S. read publication 519 and that U.S. citizens and permanent residents that live outside the United States read publication 54. I have read (not studied) a few of these and they all seem to be different (e.g. the 1978 Italian agreement is perhaps the only agreement that looks exclusively at citizenship). If one of these applies to you please write to the address listed below and request a summary of it. THE SUMMARY IS HELPFUL, because the actual agreement requires close attention (IMO). IMO, you MUST read the summary to find out if you qualify to use the one from your particular country. If you pay social security type tax in a foreign country and there is no social security totalization agreement you usually can use it as a foreign paid tax on schedule A (itemized deduction) or form 1116 (foreign taxes paid on line 8) if you file a U.S. RESIDENT RETURN. Read IRC section 906(b)(1)(A) if you file a 1040NR to see if you can use this tax as a credit or deduction. You probably can't. I have seen copies of these agreements in a couple of places. I believe one place is the Commerce Clearing House's three volume set called Tax Treaties. The only general description (besides a Journal article) of them I remember reading is in the Tax Management Portfolio number 917, Chapter 8, page A-40. The Tax Management Portfolio service is in many University and College Libraries (and I believe it is on CDROM). Frank ======================================================================== USUALLY READ BY NON U.S. CITIZENS WORKING IN THE UNITED STATES IRS publication 519, page 41 (1993). INTERNATIONAL SOCIAL SECURITY AGREEMENTS The United States has entered into bilateral social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries. Agreements with Austria, Belgium, Canada, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom are in effect. An agreement with Greece is expected to become effective soon. Other agreements are also expected to enter into force in the future. Under these agreements dual coverage and dual contributions (taxes) for the same work are eliminated. The agreements will generally make sure that social security taxes are paid only to one country. Generally, under these agreements, you will be subject to social security taxes only in the country where you are working. However, if you are temporarily sent to work in another country, and your pay would normally be subject to social security taxes in both countries, the agreement may provide that you can remain covered only by the social security system of the country from which you were sent. More information on any specific agreement can be obtained by contacting the U.S. Social Security Administration. To establish that your pay is subject only to foreign social security taxes and is exempt from U.S. social security taxes (including the Medicare tax) as a result of an agreement, you or your employer should request a statement from the appropriate agency of the foreign country. This will usually be the same agency to which you or your employer pay your foreign social security taxes. The foreign agency will be able to tell you what information is needed for them to issue the statement. Your employer should keep a copy of the statement because it may be needed to show why you are exempt from U.S. social security taxes. You or your employer will need to request a statement from the foreign agency if you are working in a foreign country and would normally be subject to U.S. social security taxes, but are exempt as a result of an agreement. However, some of the countries with which the United States has agreements will not issue statements in these cases. If the foreign agency refuses to issue the necessary statement, either you or your employer should request a statement from the U.S. Social Security Administration, Office of International Policy, P.O. Box 17741, Baltimore, MD 21235, that your wages are not covered by the U.S. social security system. Only wages paid on or after the effective date of the agreement can be exempt from U.S. social security taxes. ======================================================================== USUALLY READ BY U.S. CITIZENS AND PERMANENT RESIDENTS WORKING ON FOREIGN COUNTRIES. >From IRS publication 54. BINATIONAL SOCIAL SECURITY (TOTALIZATION) AGREEMENTS The United States has entered into agreements with several foreign countries to coordinate social security coverage and taxation of workers who are employed in one of the countries. These agreements are commonly referred to as totalization agreements. Agreements are in effect with the following countries: Austria, Belgium, Canada, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and The United Kingdom Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. The agreements generally make sure that social security taxes are paid only to one country. Generally, under these agreements, you will only be subject to social security taxes in the country where you are working. However, if you are temporarily sent to work in a foreign country, and your pay would otherwise be subject to social s security taxes in both the United States and that country, you can remain covered only by U.S. social security. More information on any specific agreement can be obtained by contacting the United States Social Security Administration. To establish that your pay in a foreign country is subject only to U.S. social security tax and is exempt from foreign social security tax, your employer in the United States should write to the United States Social Security Administration, Office of International Policy, Post Office Box 17741, Baltimore, MD 21235. Your employer should include the following information in the letter: (1) Your name, (2) Your U.S. social security number, (3) Your date and place of birth, (4) The country of which you are a citizen, (5) The country of your permanent residence, (6) The name and address of your employer in the United States and in the foreign country, (7) The date and place you were hired, and (8) The beginning date and the expected ending date of your employment in the foreign country. If you are permanently working in a foreign country with which the United States has a social security agreement and your pay is exempt under the agreement from U.S. social security tax, you or your employer should get a statement from the authorized official or agency of the foreign verifying that your pay is exempt. If the authorities of the foreign country will not issue such a statement, either you or your employer should get a statement from the U.S. Social Security Administration, Office of International Policy, at the above address, that your wages are not covered by the U.S. social security system. Include the information shown in items 1--8 above. This statement should be kept by your employer as it establishes that your pay is exempt from U.S. social security tax. Only wages paid on or after the effective date of the agreement can be exempt from U.S. social security tax. +------------------------------------------------------------------------+ | Frank McNeil | The Foolish man doesn't learn from his mistakes. | | ftmexpat@netcom.com | The Average man learns from his mistakes. | | Tax Code Junkie | The Wise man learns from other peoples mistakes. | +------------------------------------------------------------------------+