Publication 519 |
2000 Tax Year |
Social Security & Medicare Taxes
If you work as an employee in the United States, you must pay
social security and Medicare taxes in most cases. Your payments of
these taxes contribute to your coverage under the U.S. social security
system. Social security coverage provides retirement benefits and
medical insurance (Medicare) benefits to individuals who meet certain
eligibility requirements.
In most cases, the first $76,200 of taxable wages received in 2000
for services performed in the United States is subject to social
security tax. All taxable wages are subject to Medicare tax. Your
employer deducts these taxes from each wage payment. Your employer
must deduct these taxes even if you do not expect to qualify for
social security or Medicare benefits. You can claim a credit for
excess social security tax on your income tax return if you have more
than one employer and the amount deducted from your combined wages for
2000 is more than $4,724.40. Use the worksheet in chapter 3 of
Publication 505,
Tax Withholding and Estimated Tax, to
figure your credit.
If any one employer deducted more than $4,724.40, you cannot claim
a credit for that amount. Ask your employer to refund the excess.
In general, U.S. social security and Medicare taxes apply to
payments of wages for services performed as an employee in the United
States, regardless of the citizenship or residence of either the
employee or the employer. In limited situations, these taxes apply to
wages for services performed outside the United States. Your employer
should be able to tell you if social security and Medicare taxes apply
to your wages. You cannot make voluntary payments if no taxes are due.
Students and
Exchange Visitors
Generally, services performed by you as a nonresident alien
temporarily in the United States as a nonimmigrant under subparagraph
(F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and
Nationality Act are not covered under the social security program if
the services are performed to carry out the purpose for which you were
admitted to the United States. This means that there will be no
withholding of social security or Medicare taxes from the pay you
receive for these services. These types of services are very limited,
and generally include only on-campus work, practical training, and
economic hardship employment.
However, you are covered under the social security program for
these services if you are considered a resident alien as discussed in
chapter 1,
even though your nonimmigrant classification ("F,"
"J," "M," or "Q") remains the same. Social security and
Medicare taxes will be withheld from your pay.
Nonresident Alien Students
If you are a nonresident alien admitted to the United States as a
student, you generally are not permitted to work for a wage or salary
or to engage in business while you are in the United States. In some
cases, a student admitted to the United States in "F-1,"
"M-1," or "J-1" status is granted permission to
work, and it is so noted on the student's copy of Immigration Form
I-94, Arrival-Departure Record. Social security and
Medicare taxes are not withheld from pay for the work unless the
student is considered a resident alien.
Any student who is enrolled and regularly attending classes at a
school may be exempt from social security and Medicare taxes on pay
for services performed for that school.
The Immigration and Naturalization Service (INS) permits on-campus
work for students in "F-1" status if it does not displace a
U.S. resident. On-campus work means work performed on the school's
premises. On-campus work includes work performed at an off-campus
location that is educationally affiliated with the school. On-campus
work under the terms of a scholarship, fellowship, or assistantship is
considered part of the academic program of a student taking a full
course of study and is permitted by the INS. In this case, the
educational institution endorses the Form I-20. Social security
and Medicare taxes are not withheld from pay for this work unless the
student is considered a resident alien.
Employment due to severe economic necessity and for optional
practical training is sometimes permitted for students in "F-1"
status. Students granted permission to work due to severe economic
necessity or for optional practical training will be issued Form
I-688B or Form I-766 by INS. Social security and Medicare
taxes are not withheld from pay for this work unless the student is
considered a resident alien.
Students in "M-1" status who have completed a course of
study can accept employment or practical training for up to six months
and must have a Form I-688B or Form I-766 issued by INS.
Social security and Medicare taxes are not withheld from "M-1"
students' pay for these services unless the student is considered a
resident alien.
In all other cases, any services performed by a nonresident alien
student are not considered as performed to carry out the purpose for
which the student was admitted to the United States. Social security
and Medicare taxes will be withheld from pay for the services unless
the pay is exempt under the Internal Revenue Code.
Exchange Visitors
Nonresident aliens are admitted to the United States as
nonimmigrant exchange visitors under section 101(a)(15)(J) of the
Immigration and Nationality Act through the sponsorship of approved
organizations and institutions that are responsible for establishing a
program for the exchange visitor and for any later modification of
that program. Generally, an exchange visitor who has the permission of
the sponsor can work for the same reasons as the students discussed
above. In these cases, permission is granted by a letter from the
exchange visitor's sponsor or by endorsement from the program sponsor
on Form IAP-66, Certificate of Eligibility.
Social security and Medicare taxes are not withheld on pay for
services of an exchange visitor who has been given permission to work
and who possesses or obtains a letter of authorization from the
sponsor unless the exchange visitor is considered a resident alien.
In all other cases, services performed by an exchange visitor are
not considered as performed to carry out the purpose for which the
visitor was admitted to the United States. Social security and
Medicare taxes are withheld from pay for the services unless the pay
is exempt under the Internal Revenue Code.
If you are a "J-1" visa holder, your spouse or child may
be permitted to work in the United States with the prior approval of
the INS and issuance of Form I-688B or Form I-766.
Nonresident aliens admitted to the United States as participants in
cultural exchange programs under section 101(a)(15)(Q) of the
Immigration and Nationality Act may be exempt from social security and
Medicare taxes. Aliens with "Q" visas are aliens whose employment
or training affords the opportunity for culture-sharing with the
American public. They are allowed to work in the United States for a
specific employer in an approved cultural exchange program. The
employer must be the petitioner through whom the alien obtained the
"Q" visa. Social security and Medicare taxes are not withheld
from pay for this work unless the alien is considered a resident
alien. Aliens with "Q" visas are not permitted to engage in
employment outside the exchange program activities.
Refund of Taxes Withheld in Error
If social security or Medicare taxes were withheld in error from
pay that is not subject to these taxes, contact the employer who
withheld the taxes for a refund. If you are unable to get a full
refund of the amount from your employer, file a claim for refund with
the Internal Revenue Service on Form 843, Claim for Refund and
Request for Abatement. Attach the following items to Form 843.
- A copy of your Form W-2 to prove the amount of social
security and Medicare taxes withheld.
- A copy of your visa (if not stamped on Form I-94), INS
Form I-94 and INS Form I-538, Certification by
Designated School Official.
- A statement from your employer indicating the amount of the
reimbursement your employer provided and the amount of the credit or
refund your employer claimed or you authorized your employer to claim.
If you cannot obtain this statement from your employer, you must
provide this information on your own statement and explain
why you are not attaching a statement from your employer.
File Form 843 (with attachments) with the IRS office where your
employer's returns were filed. If you do not know where your
employer's returns were filed, file Form 843 with the Internal Revenue
Service Center, Philadelphia, PA 19255.
Self-Employment Tax
Self-employment tax is the social security and Medicare taxes for
individuals who are self-employed. Nonresident aliens are not subject
to self-employment tax. Residents of the Virgin Islands, Puerto Rico,
Guam, the Commonwealth of the Northern Mariana Islands, or American
Samoa are considered U.S. residents for this purpose and are subject
to the self-employment tax.
Resident aliens must pay self-employment tax under the same rules
that apply to U.S. citizens. However, a resident alien employed by an
international organization, a foreign government, or a wholly-owned
instrumentality of a foreign government is not subject to the
self-employment tax on income earned in the United States.
Self-employment income you receive while you are a resident alien
is subject to self-employment tax even if it was paid for services you
performed as a nonresident alien.
Example.
Bill Jones is an author engaged in the business of writing books.
Bill had several books published in a foreign country while he was a
citizen and resident of that country. During 2000, Bill entered the
United States as a resident alien. After becoming a U.S. resident, he
continued to receive royalties from his foreign publisher. Bill
reports his income and expenses on the cash basis (he reports income
on his tax return when received and deducts expenses when paid).
Bill's 2000 self-employment income includes the royalties received
after he became a U.S. resident even though the books were published
while he was a nonresident alien.
Reporting self-employment tax.
Use Schedule SE (Form 1040) to report and figure your
self-employment tax. Then enter the tax on line 52 of Form 1040 and
attach Schedule SE to Form 1040.
Deduction for one-half of self-employment tax.
If you must pay self-employment tax, you can deduct one-half of the
self-employment tax paid in figuring your adjusted gross income.
More information.
Get Publication 533
for more information about self-employment tax.
International Social
Security Agreements
The United States has entered into social security agreements with
foreign countries to coordinate social security coverage and taxation
of workers employed for part or all of their working careers in one of
the countries. These agreements are commonly referred to as
totalization agreements. Under these agreements, dual coverage and
dual contributions (taxes) for the same work are eliminated. The
agreements generally make sure that social security taxes (including
self-employment tax) are paid only to one country. Agreements are in
effect with the following countries.
- Austria.
- Belgium.
- Canada.
- Finland.
- France.
- Germany.
- Greece.
- Ireland.
- Italy.
- Luxembourg.
- The Netherlands.
- Norway.
- Portugal.
- Spain.
- Sweden.
- Switzerland.
- The United Kingdom.
Other agreements are also expected to enter into force in the
future.
Employees.
Generally, under these agreements, you are subject to social
security taxes only in the country where you are working. However, if
you are temporarily sent to work for the same employer in the United
states and your pay would normally be subject to social security taxes
in both countries, most agreements provide that you remain covered
only by the social security system of the country from which you were
sent. You can get more information on any agreement by contacting the
U.S. Social Security Administration at the address given later. If you
have access to the Internet, you can get more information at
www.ssa.gov/international.
To establish that your pay is subject only to foreign social
security taxes and is exempt from U.S. social security taxes
(including the Medicare tax) under an agreement, you or your employer
should request a certificate of coverage from the appropriate agency
of the foreign country. This will usually be the same agency to which
you or your employer pays your foreign social security taxes. The
foreign agency will be able to tell you what information is needed for
them to issue the certificate. Your employer should keep a copy of the
certificate because it may be needed to show why you are exempt from
U.S. social security taxes. Only wages paid on or after the effective
date of the agreement can be exempt from U.S. social security taxes.
|
Some of the countries with which the United States has agreements
will not issue certificates of coverage. In this case, either you or
your employer should request a statement from the following address.
U.S. Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, MD 21235-7741
|
Self-employed individuals.
Under most agreements, self-employed individuals are covered by the
social security system of the country where they reside. However,
under some agreements, you may be exempt from U.S. self-employment tax
if you temporarily transfer your business activity to or from the
United States.
If you believe that your self-employment income is subject only to
U.S. self-employment tax and is exempt from foreign social security
taxes, request a certificate of coverage from the U.S. Social Security
Administration at the address given earlier. This certificate will
establish your exemption from foreign social security taxes.
To establish that your self-employment income is subject only to
foreign social security taxes and is exempt from U.S. self-employment
tax, request a certificate of coverage from the appropriate agency of
the foreign country. If the foreign country will not issue the
certificate, you should request a statement that your income is not
covered by the U.S. social security system. Request it from the U.S.
Social Security Administration at the address given earlier. Attach a
photocopy of either statement to Form 1040 each year you are exempt.
Also print "Exempt, see attached statement" on the line for
self-employment tax.
Previous| First | Next
Publication Index | IRS-Forms Main | Home
|