Totalization agreements are popular with U.S. companies because they exempt employers from paying double Social Security taxes. According to a regular study of net tax savings by the Social Security Administration`s (SSA) Office of International Programs, U.S. companies and their employees save $1.5 billion in foreign taxes on Social Security each year. Such tax savings help make U.S. operations more profitable around the world, while improving the competitiveness of U.S. trade. The totalization agreements also excuse foreign workers temporarily sent to the U.S. for paying U.S.
social security taxes. This results in annual savings of approximately $500 million for affected foreign workers and their employers. These tax savings make the United States a more attractive destination for foreign capital, thus encouraging foreign direct investment. The FCN contract with Italy, which entered into force in 1949 and was amended in 1951, expressly invited the United States and the Italian Republic to start negotiations for a bilateral agreement on social security. Since there was no precedent in U.S. law or specific authorization law, the means of entering into such an agreement were unclear. Reaching agreements as treaties would subject them to the consultation and approval clause of the U.S. Constitution and would require a two-thirds positive majority in the Senate for ratification. This was deemed unenforceable and, upon ratification of the FCN Treaty with Italy, the Senate passed a resolution on July 21, 1953, calling for any resulting social security agreement „to be concluded by the United States only in accordance with legal provisions.“ Any agreement (with the exception of the one concluded with Italy) provides for a derogation from the territoriality rule, which aims to minimise disruptions in the coverage of the careers of workers whose employers temporarily send them abroad. Under this derogation for „exempted workers“, a person temporarily transferred to another country for the same employer remains covered only by the country from which he or she was posted. For example, a U.S.
citizen or resident who is temporarily transferred by a U.S. employer to work in a contracting country remains covered by the U.S. program and is exempt from coverage under the host country system. The worker and employer only contribute to the U.S. program. Although tabularization agreements vary depending on the social security system of the partner country, Table A-1 summarizes some frequent coverage situations for U.S. workers sent to work abroad. Generally speaking, a worker is covered by the social security system of the country where he works. However, the totalization agreements provide exceptions for certain classes of American workers. Since tablation agreements are inherently reciprocal, these waivers apply equally to foreign workers in the United States.
I am an independent American citizen who lives in Belgium, who has a totalization agreement with the United States. Since I pay all Social Security taxes, I shouldn`t have to pay U.S. taxes on self-reliance. I have the necessary certificate to prove it. My question is: what can I do with TurboTax so that the tax I owe is 0? (The only tax I owe is the self-employment tax that I shouldn`t have to pay.) I failed to get it to work last year and sent my return with a copy of the certificate. Is there a way to make it work electronically? To prove to the tax authorities of a host country that a worker is exempt from paying that country`s social security taxes, he or she must keep a certificate of coverage (or his employer) and present it if necessary. The certificate is a document issued by the country whose laws continue to apply to that person in accordance with the rules of the Convention. .