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Zaher Fallahi, Tax CPA; Social Security and Medicare taxes for U.S. Citizens and Green Card Holders hired Overseas by US Employers

posted Feb 22, 2015, 10:17 PM by Zaher Fallahi   [ updated Feb 22, 2015, 10:20 PM ]

Generally, compensation paid to U.S. citizens and green card holders hired by US employers overseas are generally subject to Social Security and Medicare taxes.

US employer refers to;  a) an individual who is a US citizen or green card holder, b) a corporation established under the laws of US, Washington DC or any State,  c) a partnership where more than two-thirds of the partners are US citizens or green card holders, and, d) a trust where all of the trustees are US citizens or green card holders.

A US employer with a foreign affiliate may file the IRS Form 2032 and request its affiliate to withhold  Social Security and Medicare taxes from employees who are US citizens or green card holders.

 The compensation paid for following services are exempt from Social Security and Medicare taxes;  1) agricultural workers, b) students employed by a school, college, or university if the student is enrolled and regularly attending classes at such school, college, or university, and, c) duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry. Zaher Fallahi, Tax CPA.

Sometimes foreign countries impose their own Social Security tax on the compensation of a U.S. citizen or green card holder employed in that those countries by US employers. This may create double taxation of Social Security taxes of such employees’ compensation. To avoid this potential problem, the US has entered into “Totalization Agreements” with the following countries.

 Australia, Austria, Belgium, Canada, Czech Republic, Chile, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, South Korea, Spain, Sweden, Switzerland and United Kingdom.

Zaher Fallahi, Tax CPA, assists US clients including Americans living overseas with  tax preparation, tax planning, IRS representation, and resolving their problems regarding undeclared foreign bank accounts (offshore voluntary disclosure program, OVDP), report of foreign bank & financial accounts (FBAR, Foreign Account Tax Compliance Act (FATCA), Telephones:  (310) 719-1040 (Los Angeles), ( 714) 546-4272 (Orange County) or e-mail:  [email protected]