How to Indicate You're Not Liable to SS on Tax Return?

Hi all,

My aunt is a CPA and is assisting me with my US taxes, but she is unfamiliar with how I am able to "invoke/indicate" that I am not liable for SS as per the Totalization Agreement with the UK (I pay NI).

I am aware that I can get a certificate of coverage from the UK government as supporting evidence, but I was wondering if anyone knows how to reflect this in the actual forms so that when I fill out all the required forms/fields it doesn't look like I still owe SS.

Let me know if more details are required!

Sorry I feel like I should say that I am self-employed and am a contractor for a US-based organization so I am paid in USD to a US bank acct

I don’t know the answer but am interested in seeing the replies. I guess you are covered in the table below.

https://www.ssa.gov/pubs/EN-05-10199.pdf

Thanks for your reply Jedi - that is a helpful document to have as a reference. Yeah it seems to imply I would be covered and would not have to pay both US and UK social security taxes.

I actually had a 30 min consultation with the company "Taxes for Expats" and they also said that I would be able to file in a way that does not make me seem liable for US SS, but they said they were unable to instruct me how to go about that...just that it wasn't something I needed a supplemental form for.

If anyone has guidance on this it would be great. I would prefer not paying them to file my taxes since my aunt is assisting...but than again spending $500 on their service is much cheaper than the double tax I would pay   

Would FICA be useful to you though?

Would FICA be useful to you though?

10 years of contributions to SS is probably worth a lot more than 10 years of contributions to OAP even after WEP. But that is the long game and I feel like the OP is quite young and trying to keep every penny they can at the moment.

What about Medicare taxes? Does the Totalization agreement exclude those as well as FICA? If you are never going to be living in the USA then those taxes are definitely a waste, and I think for a self employed person they are 2.9% of wages.

I am retired and living in England and have a non-qualified US pension of $23k from my former employer delivered via a W2 and the IRS has determined that I and my  ex-employer should pay FICA and Medicare tax, even after age 70! It irks me a little to have to pay extra taxes like this but I have run the race to a comfortable retirement and am very grateful for where I am right now.

I guess it’s down to individual circumstances and any ultimate gain in SS. From memory I think FICA adds up to a bit over 6% of gross pay. Ultimately it may be question for a U.K. based account with an understanding of the Totalisation agreement.

I guess it’s down to individual circumstances and any ultimate gain in SS. From memory I think FICA adds up to a bit over 6% of gross pay. Ultimately it may be question for a U.K. based account with an understanding of the Totalisation agreement.

For self employed folks they have to pay both employee and employer contributions which is 15.3% for 2023, so quite a hit on top of Medicare tax of 2.9% making a total of 18.2% of payroll taxes for which there are no tax credits so avoidance under the Totalization scheme is worth pursuing I think.

https://www.forbes.com/advisor/business/payroll-tax-rates/#:~:text=The%20employer%20FICA%20rate%20is,workers%20pay%20the%20full%2015.3%25.

In most cases, the federal payroll tax rate is about 15.3%, with the employee covering 7.65% and the employer covering 7.65%. If you’re self-employed—as a sole proprietor or business owner—you’re responsible for the full 15.3%, usually referred to as self-employment tax.

Thank you both for weighing in!

All excellent points - I am based in the UK with a UK bank account and my long-term plan is to stay in the UK (I've been here for almost 9 years) so I am really just looking for some advice on how to not pay SS when filing my taxes as someone who is self-employed.

For 6 out of the 9 years, I have been a full-time employee for a UK-based employer so I simply completed the FEIE form and wasn't doubly taxed. When I became self-employed my aunt started to assist me with my taxes, but I've realized that I've paid into both systems for two years unnecessarily. But she just doesn't know how to complete the forms so it reflects my exemption status.

If there is any advice pertaining to that I would be very grateful.

There is very little in the question indicating self-employment. Income from the engagement would typically be reported at Line 1h on page 1 of Form 1040. No US social security liability exists.

Hi Guya - thanks for the advice! I will relay this back to my aunt

And yes I did realize right after posting that I should have included that I am self-employed, but I tried to provide a little more context by replying immediately after. Is that what you mean by "there is very little in the question indicating self-employment."

Or were you alluding to something else?

Appreciate the assistance

Hi Guya - thanks for the advice! I will relay this back to my aunt

And yes I did realize right after posting that I should have included that I am self-employed, but I tried to provide a little more context by replying immediately after. Is that what you mean by "there is very little in the question indicating self-employment."

Or were you alluding to something else?

Appreciate the assistance

The question is quite straightforward. Under the laws of the nation where the work is performed, is the engagement one of employment or, alternatively, self-employment? The question mentions that you are engaged by a single business, which sounds more indicative of employment than self-employment.  You may wish to seek employment law advice if the status of the engagement is unclear.

For self employed folks they have to pay both employee and employer contributions which is 15.3% for 2023, so quite a hit on top of Medicare tax of 2.9% making a total of 18.2% of payroll taxes for which there are no tax credits so avoidance under the Totalization scheme is worth pursuing I think.

https://www.forbes.com/advisor/business/payroll-tax-rates/#:~:text=The%20employer%20FICA%20rate%20is,workers%20pay%20the%20full%2015.3%25.

National Insurance Contributions in the UK can add up quickly also - depending on the 'self employed' structure - i.e. sole trader versus limited company - limited company has its advantages - if you have someone else on the payroll (i.e. spouse as a Non-director) where the Employment Allowance can be claimed and thereby eliminates employer National Insurance (in most cases). Self employment can be a minefield in the Uk as well as the US - there are also the GILTI considerations of having your own limited company