U.S. Tax Preparation Worldwide
James Maertin CPA
IRS Tax Law Changes
Interest and Dividends
Foreign Bank Reporting
Social Security, Medicare,
Self Employment Tax
Extensions, Late Payments, Estimated Tax
Tax Resident, Nonresident, Dual Status
Social Security, Medicare and Self Employment Tax
Withholding Rates for Wages/Salary
The current tax rate for social security is 6.2% for the employer
and 6.2% for the employee, or 12.4% total up to $128,400 of wages (2018). The
current rate for Medicare is 1.45% for the employer and 1.45% for the employee,
or 2.9% total, with no wage limit for Medicare tax.
Self Employment Tax
If you are self employed, your payments of social security and
Medicare taxes are referred to as self employment tax. You must pay
self-employment tax if your net earnings from self-employment are at least $400.
You will pay the full amount of social security and Medicare tax (12.4% and 2.9%
respectively) based on your net self employment income, although 1/2 of the self
employment tax can be deducted on Form 1040.
For 2018, the maximum amount of net earnings from
self-employment that is subject to the social security part of the
self-employment tax increases to $128,400. All net earnings are subject to the
Medicare part of the tax.
Additional Medicare Tax Withholding Rate
An individual is liable for Additional Medicare Tax of 0.9% if
his/her (and spouse if filing jointly) wages, compensation, or self-employment
income exceed the threshold amount for the individual's filing status (see
Married filing jointly
Married filing separate
Head of household (with qualifying person)
International Social Security Agreements (Totalization
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
Under these agreements, dual coverage and dual contributions (taxes) for the
same work are eliminated. They generally make sure that social
security taxes (including self-employment tax) are paid only to one country.
U.S. Citizens and Resident
Aliens Abroad - Employees:
In general, U.S. social
security and Medicare taxes do not apply to wages for services you perform as an
employee outside the United States unless one of the following exceptions
1. You perform the services on or in connection with an American vessel or
aircraft and either:
a. You entered into
your employment contract within the United States, or
b. The vessel or
aircraft touches at a U.S. port while you are employed on it.
2. You are working in one of the countries with which the United States has
entered into a bilateral
3. You are working for an American employer.
4. You are working for a foreign affiliate of an American employer under a
voluntary agreement entered into between the American employer and the U.S.
For more information, see
IRS Publication 54
U.S. Citizens and Resident
Aliens Abroad - Self Employment:
If you are working in one of
the countries with which the United States has entered into a bilateral
security agreement, in general self-employed persons who are subject to dual
taxation will only be covered by the social security system of the country where
following foreign nationals are exempt from paying social security and Medicare
F-1, J-1, M-1, Q-1 or Q-2 visa holders filing Form 1040NR.
Nonresident Alien students, scholars, professors, teachers, trainees,
researchers, physicians, au pairs, summer camp workers, and other aliens
temporarily present in the United States in F-1, J-1, M-1, or Q-1/Q-2
nonimmigrant status are exempt from social security/Medicare tax on wages
paid to them for services performed within the United States as long as such
services are allowed by USCIS for these nonimmigrant statuses, and such
services are performed to carry out the purposes for which such visas were
issued to them.
The exemption does not apply to the following
students, teachers and trainees who become resident aliens for tax purposes
(filing Form 1040). See IRS Exempt Individuals.
a. Teacher or trainee on a J-1 or Q-1 visa if
exempt as a teacher, trainee, or student for any part of
2 of the 6 preceding calendars years (unless certain exceptions are
b. Students on F-1, J-1, M-1, or Q-1/Q-2 who have
exempt as a teacher, trainee, or student for any part of more than 5
calendar years (unless certain exceptions are
Refund of Social Security & Medicare 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 the page from your passport
showing the visa stamp,
- INS Form I-94,
- If applicable INS Form I-538,
Certification by Designated School Official, and
- 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 that 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.
- If applicable, Form
8316, Information Regarding Request for Refund of Social Security Tax
Erroneously Withheld on Wages Received by a Nonresident Alien on an F, J, or
M Type Visa (PDF)
File Form 843 (with attachments) with the IRS office where your
employer's Forms 941 returns were filed. You can locate the IRS office where
your employer files his Form 941 by going to Where
to File Tax Returns.