U.S. Social Security Totalization Agreements

Description

An individual's liability for social security contributions is determined differently than the same person's income tax liability. Unlike U.S. income tax liability, which is based on citizenship or residence, social contributions are determined based on whether the individual's employment or self-employment is "covered" employment or self-employment. Likewise, as retirement benefits are determined based on an individual’s entire working career, lapses in coverage can impact retirement benefits.

In addition, most countries require a minimum period of coverage in order to be eligible for retirement benefits. Individuals working in multiple jurisdictions and contributing to the social security system of multiple countries have the potential for the 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 an individual having social tax withheld for benefits which will never be received.

The U.S. has taken steps to address this problem in the form of "totalization agreements." These are treaty-force agreements that eliminate dual contributions and allow affected workers to receive a "totalized" benefit where workers are subject to social contributions outside their home country. 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.