Do I still owe U.S. Social Security or self-employment tax on Foreign Earned Income?

If you are an employee, it depends on who your employer is.

U.S. employers are required to withhold U.S. Social Security from the compensation paid to their employees working in the U.S. and also from those working overseas. Due to Social Security Totalization agreements made with 25 countries, an exception to withholding U.S. Social Security can be elected by U.S. employees whose foreign service for the U.S. employer in a participating country is anticipated to exceed 5 years.

Foreign employers are not required to withhold U.S. Social Security unless they are an affiliate of a U.S. company and have made an election to withhold Social Security for all of their U.S.

If you are working for a foreign employer who has no requirement to withhold U.S. social security, you have no obligation to remit U.S. social security taxes on your earnings and in fact, are prohibited from making such voluntary contributions to the U.S. Social Security System.

Self-Employment Tax

If you're self-employed outside the U.S., you'll still owe U.S. self-employment tax on foreign earned income. This is true even if you're able to claim the foreign earned income exclusion. However, Social Security Totalization Agreements between the United States and many foreign countries may prevent you from being subject to self-employment taxes in both countries.

File Your Expat Tax Return with H&R Block

Have more questions about Social Security Totalization Agreements or the Foreign Earned Income Exclusion? Ready to file? No matter how complicated your U.S. tax return is, there’s an Expat Tax Expert ready to help. Get started with Virtual Expat Tax Preparation from H&R Block Expat Tax Services.

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