U.S.-Foreign Social Security Totalization Agreements: Planning and Reporting Amid New IRS Scrutiny

Avoiding Double Taxation, Maximizing Government Retirement Benefits, and Documenting Exemption Claims

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, June 12, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers with a comprehensive guide to navigating the complex area of social security totalization agreements. The panel will detail how totalization agreements operate and how eligible taxpayers must report the foreign country’s withholding to claim the exemption. The experts will also discuss the new IRS initiative to require documentation from taxpayers claiming an exemption from Social Security withholding under a claim of a totalization agreement.

Description

For U.S. workers employed outside the U.S., or non-U.S. citizens who earn salaries from an American employer, withholding for “social” benefits taxes can create taxation and benefits eligibility issues. Most industrialized countries require employers to withhold social tax from wage income earned within their territories.

Because the U.S. taxes its citizens on worldwide income, U.S. taxpayers earning foreign-sourced wages generally must remit social security taxes on foreign-earned income. Without a treaty or other exemptions, this often leads to double social security tax on the same income.

Another problem incurred by wage earners who earn income in, and have social tax withheld by, two different countries is the potential loss of benefits from those social tax withholdings. The U.S. and most other countries require individuals to pay in for a specified length of time before they are eligible for benefits. This can lead to a taxpayer having social tax withheld for benefits they will never receive.

The U.S. has taken steps to address this problem in the form of “totalization agreements.” These are treaty-force agreements that eliminate double taxation and allow affected wage earners to “totalize” their social tax accounts by crediting amounts withheld by their non-resident countries. Tax advisers must understand the relevant treaty rules and documentation requirements to assist their clients in claiming totalization agreement benefits.

Listen as our experienced panel provides comprehensive and practical guidance, detailing what tax advisers need to know to help their clients navigate the area of totalization agreements to avoid double taxation and protect social security and other social tax benefits.

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Outline

  1. Overview of U.S. social security contributions system
  2. Structure of totalization agreements
  3. Claiming and documenting the exemption
  4. “Detached worker” exception
  5. Self-employed workers
  6. Traps for the unwary
  7. New IRS initiative in response to TIGTA report

Benefits

The panel will review these and other important issues:

  • How do totalization agreements work?
  • With which countries does the U.S. have active totalization agreements?
  • What documentation does the taxpayer and employer need to obtain, submit and/or retain to support an exemption claim under totalization?
  • How do the “detached worker” exception and the “five-year” rule operate?
  • Calculating Social Security benefits under a totalization arrangement

Faculty

Finch, Stacy
Stacy Finch
Vice President, International Compensation & Benefits
Marriott International

Ms. Finch has over 20 years of experience in global mobility and international tax matters. She leads Marriott...  |  Read More

Kennedy-C. Edward
C. Edward Kennedy, Jr., CPA, JD
Managing Director
C. Edward Kennedy Jr.

Mr. Kennedy has more than 36 years of experience dealing with a variety of international tax matters, specializing in...  |  Read More

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