Tax Certificate of Coverage ?

Hi all,

I got this message from my tax person in the US:

"In order for your self-employment income to be exempt from SE tax in the US, we need to attach a copy of a Certificate of Coverage issued by the Inland Revenue (apparently Form UK/US 1) to the US return every year to claim an exemption.  Do you have such a certificate?  I think this provides evidence that you are covered by the UK National Insurance (i.e., Social Security) system and are paying into that system according to the UK requirements."

He sent this link to the US website that covers this stuff:

http://www.ssa.gov/international/Agreement_Pamphlets/uk.html

I sent a letter to the UK address listed under "Certificates of Coverage" in the link, but it's been almost two months and I haven't gotten a response.

I can't find any information about this certificate on the HMRC website? Anyone got any experience with this stuff?  Any advice on how to get this certificate?

Currently, HMRC are processing requests make on 18 July, so 2 months is normal. I'd suggest waiting a couple of weeks, and if you don't hear from them, then call on 0845 915 4811.

You do need to include both your US Social Security and your UK National Insurance number, and if you didn't, this may cause a delay.

It is generally quicker to apply for the UK/US 1 via fax. The correct fax number is 0191 225 4215.

You need to include your full name, address, NI number and SS number.

From experience, 9 out of 10 times when exemption is claimed from SE tax and the certificate is not enclosed, there are no problems, and the IRS process as normal. Approx 1 out of 10 times, the IRS do insist on seeing the certificate. You may want to file the return now without the certificate, and worse comes to the worse the IRS will ask to see the certificate later.

Thanks for the reply!  After I posted I found the number of the office to call, and they confirmed all the info and suggested it might take up to 12 weeks.  I'm pretty sure my letter had all the requested stuff, so it's just a matter of waiting a bit longer

There is nothing at in the totalization agreement that requires you have a certificate. Indeed 99% of tax advisers simply attach a footnote/statement to the return stating that their client is covered under the agreement.

Why does your US tax guy want this paperwork?

I assume he wants it based on the information in the link in the original post.

The IRS do say: Certificates of coverage issued by the United Kingdom should be retained by the employer in the United States in case of an audit by the Internal Revenue Service (IRS).  No copy should be sent to the IRS unless specifically requested by IRS.  However, a self-employed person must attach a photocopy of the certificate to his or her income tax return each year as proof of the U.S. exemption.

Don't hold your return for this.  Just attach a statement.  Technically speaking a CoC is not required.  The totalisation agreement automatically applies.

Just to close this out, I eventually got the certificate of coverage from HMRC, sent it off to my tax people in the US, and all is right with the world.  Thanks again to everyone for the helpful replies and advice.

Does anyone know if this works retrospectively? And if so do we use 1040x to claim for overpaid SS taxes?

If your employer has misclassified someone as a self-employed when she or he was actually an employee under local law you can file Form 8919.

Your previous posts imply your wife was an employee of her US employer, and she happened to be perrforming her services in the UK. She may be a PE of the entity so there are corporate issues that  have hopefully been addressed. From a social security perspective, the employer in the US needs to have applied for a certificate of coverage and UK NIC should have been paid as an employee. Was UK  employee NIC paid?

Thanks for the reply. Her actual status is self-employed so I don't think there's any problem with being a PE. We only got up to date with UK taxes this year, but NICs have been paid, so I'm presuming that the US SE taxes already paid (three years' worth) can be reclaimed under the Totalization Agreement. If that's the case (which I really hope it is...) I'm wondering how to go about claiming?