Table of contents:
Social Security Credits
Q: Can I report my Swiss Social Security benefits on my U.S. tax return?
A: The treatment of Social Security and other public pension benefits in the Convention between the United States of America and the Swiss Confederation for the avoidance of double taxation concerning taxes on income differs from the U.S. model, under which the source State retains exclusive taxation rights.
This treatment is necessary to avoid the double taxation of U.S. Social Security benefits and other public pension benefits from Swiss residents that both countries would otherwise tax. The United States, as the source country in this situation, taxes 85 percent of the benefits that U.S. citizens and nonresident aliens living in Switzerland receive. As the country of residence, Switzerland taxes the U.S. benefits received by those individuals and does not provide any tax credits to offset the taxes paid on the same benefits in the U.S.
Because Switzerland cannot offer tax credits for people in these circumstances, even by treaty, these individuals are subject to a double tax burden. (No special double taxation relief rule is required in the reverse situation where Swiss Social Security benefits are paid to U.S. residents because Switzerland does not tax benefits in a case where it is the source country. If Switzerland were to impose a tax on such payments in the future, a U.S. foreign tax credit would be available under the general provisions of paragraph two of Article 23.
Q: Totalization Agreements: What do they mean?
A: International Social Security agreements (often called "Totalization agreements") have two primary purposes:
They eliminate double taxation on Social Security which is the situation that occurs when a worker from one country works in another country and is required to pay Social Security taxes to both countries on the same earnings. Note: if your return is filed correctly, you will not be required to pay self-employment taxes in both countries and will avoid double taxation.
They help to protect the benefits of workers who have chosen to divide their careers between the United States and another country.
Under a Totalization Agreement, if a worker has some U.S. coverage but not enough to qualify for benefits, SSA will count periods of coverage that the worker has earned under the Social Security program of an agreement country to fill the gap.
In the same way, a country party to an agreement with the United States will consider a worker's coverage under the U.S. Social Security program so that the worker may qualify for that country's Social Security benefits.
Q: My country of residence does not have a Totalization Agreement with the U.S. Will my contributions to the Social Security program in my country of residence count against my U.S. self-employment taxes?
A: If you pay social security contributions to a country that does not have a Totalization Agreement with the U.S., those contributions will NOT count against your U.S. self-employment taxes. However, you can list foreign Social Security payments as a foreign tax credit on your U.S. tax return.
Q: My country of residence does not have a Totalization Agreement with the U.S. How do I earn U.S. Social Security credits?
A: A U.S. person residing in a country that does not have a Social Security Totalization Agreement can only earn U.S. Social Security credits if they are self-employed. Because there is no Totalization Agreement, even if you pay into your local country's Social Security system, these contributions cannot be transferred into U.S. Social Security credits.
Therefore, if you are employed by a foreign employer yet have elected to contribute to the U.S. Social Security system, you may report your wages as "Other Self-Employment income reported as wages on line 7 of Form 1040." You must pay 15.3% of the amount on line 57 of Form 1040 as Self-Employment tax.
However, you will generate U.S. Social Security credits to pay this added tax.
Q: I am a non-U.S. person who receives Social Security survivor's benefits. What are my filing requirements?
A: As a non-U.S. individual receiving survivor's benefits, the IRS automatically withholds taxes from your payments. Consequently, you are not obligated to file a U.S. tax return, given that the withholding rate established by the IRS aligns with the tax liability on survivor's benefits received by nonresident individuals (those who are not U.S. citizens without a Green Card).
You will need to complete a nonresident tax return (Form 1040NR) solely if you are earning income from other U.S. sources.
Social Security Number (SSN)
Q: How to file a tax return as a recent immigrant without an SSN?
A: An immigrant who has become a U.S. person this year will be required to file a U.S. tax return for the first time next year. You should have received your Social Security number by the time your tax return is due (April 15, not including the automatic 6-month extension).
Filing without a Social Security number is possible but not recommended.
Q: I do not have a Social Security number. What should I do?
A: In most cases, you should apply for a Social Security Number ASAP. Suppose you are a U.S. citizen but were never issued (or no longer have) a Social Security Number. In that case, you may apply for or obtain a replacement SS Card on the Social Security Administration's website. If you were issued a Social Security number at birth, the U.S. Social Security Administration would restore your number using your birth certificate at your request.
While your request is being processed (it may take a few months), you should work with us to prepare your return.
Meanwhile, put 000-00-0000 in the field for your S.S. #.
Once you receive your Social Security Number, we can add it to the prepared returns quickly instead of starting the process from scratch. This method is generally more efficient than doing one operation at a time.
Q: How to obtain a Social Security Number?
A: Fill out an application for a Social Security card and visit the Social Security Administration website to find out where you can apply for an SSN in person. You can generally apply at the U.S. consulate in your resident country. Make sure to complete the application before your trip to the consulate. This way, you will know which documents you are required to present along with the application so that everything can be processed on the first attempt (and you avoid making a second trip to the consulate).
Q: What about with an Internal Revenue Service Number (IRSN)?
A: A Key point: you are ineligible for penalty waivers if you use IRSN to apply for the Streamlined Filing Compliance Procedures. You need a Social Security Number to receive amnesty protection. IRSNs were designed for IRS convenience. It is a highly unfriendly option for the taxpayer.
An IRSN is a nine-digit number issued by the IRS to people who file a return or make a payment without providing a TIN. You might have been given this number if you filed a U.S. federal tax return and did not have an SSN. Your IRSN will appear on any correspondence the IRS might have sent you concerning that return.
According to the information on the IRS website, if you submit to one of the Streamlined Filing Compliance Procedures without a valid SSN, then the IRS may assign you an IRSN (See IRMs 184.108.40.206 and 220.127.116.11). But taxpayers who submit to the Streamlined Filing Compliance Procedures without valid SSNs are not eligible for the favorable penalty provisions of the Streamlined Filing Compliance Procedures. The IRS will process returns such as subject to penalties applicable outside of the Streamlined Filing Compliance Procedures.
This number aims to identify the taxpayer who filed and/or paid for a valid TIN. It does not allow you to receive the benefits of the Streamlined Procedure and is only used for correspondence and recording payments. The agency is happy to accept payments but must link to an account. The IRSN serves as an identifier in its database.
FBARs can be e-filed after an IRSN is issued without amnesty protection. In general, we will only resort to filing without a Social Security Number and waiting for IRSN if a foreign bank has seized the client's assets and the taxpayer is forced to file immediately. Otherwise, waiting to receive a Social Security Number is a better option.
Q: How do I update my information with the Social Security Administration?
A: Online applications allow you to change your information with the U.S. Social Security Administration. However, using these applications must have a valid U.S. mailing address.
The Social Security Administration does not have a toll-free number that can be called from outside the United States. However, some embassies and consulates do have Federal Benefits Units whose purpose is to help with Social Security matters and who can accept your application.
Click here to find the Federal Benefits Unit serving your country. If your country is not listed here, please call +1 (410) 965-2356.
Q: My children do not have U.S. Social Security numbers. Should I apply for Social Security numbers for them before filing?
A: If your children are U.S. citizens:
In this case, you should obtain a Social Security number for your children. You can deduct personal exemptions from your taxable income ($4K per child), deduct childcare expenses, and receive the child tax credit if you qualify (it depends on your income). From now on, you will also be able to receive credits/deductions for higher education expenses when your children start college.
None of this is possible if your children do not have Social Security numbers.
There is also another difference that you will notice immediately. If you were previously required to file using paper forms, you would be eligible for e-Filing now.
If your children are not U.S. Citizens and do not have U.S. Social Security numbers or ITINs:
In this case, you can still file as a Head of Household.
Filing as a Head of Household means you will be subject to lower tax rates than if you filed as married filing separately (MFS). However, you will not be eligible for the same exemptions and tax credits that you would be if your children had either U.S. Social Security numbers or ITINs.
You will not qualify for e-Filing and must mail your return when you file. To be eligible for e-Filing, at least one of your dependent children must have a U.S. Social Security number or an ITIN.
If your children have at least one U.S. parent, they will most likely qualify for a U.S. Social Security number. If this is the case, you cannot apply for an ITIN and should apply for Social Security numbers for them instead. You are not required to apply for either number on behalf of your children. This decision remains yours for as long as your children are minors.
Individual tax identification number (ITIN)
ITIN - Individual Tax Identification Number is a tax ID for foreigners. The Application for an ITIN can be submitted by mail to the IRS along with the completed tax returns. Please note that individuals eligible for a Social Security number are not eligible for ITIN.
Q: I do not have a Social Security Number. Can I file without one? What about with an IRSN?
A: In most cases, you should apply for a Social Security Number ASAP. If you are a U.S. citizen, you may apply for or obtain a replacement SS Card on the Social Security Administration's website. If you were issued a Social Security Number at birth, the U.S. Social Security Administration would restore your number using your birth certificate.
While your request is being processed (it may take a few months), you should work with us to prepare your return. Then once you receive your Social Security Number, we will be able to add it to the prepared returns quickly instead of starting the whole process from scratch. This method is generally more efficient than doing one operation at a time.
Q: I have a Green Card but have not yet moved to the U.S. or applied for a Social Security Number. How do I file my U.S. taxes?
A: It would be best if you do the following:
File your first U.S. tax return in the calendar year after you obtain your Green Card, regardless of whether you have moved to the U.S.
For example, if you received your Green Card on November 10, 2021, you should file your U.S. tax return by June 15, 2022.
Filing as a senior citizen
Q: I am a senior citizen and live off of Social Security. How do I know if I need to file a tax return?
A: When seniors must file
If you are single and at least 65 years old and U.S. Social Security is the only income you receive, you do not have to file a federal income tax return. If you do earn other income, you must file if the income earned, excluding Social Security, exceeds $11,850. Remember that these income thresholds only apply to the 2015 tax year and generally increase each year slightly.
When to include Social Security income as part of your gross income
In certain situations, seniors must include their Social Security benefits as part of their gross income. If you are married but file a separate tax return and live with your spouse at any time during the year, then all your Social Security benefits are considered gross income, which may require you to file a tax return. Additionally, a number of your Social Security benefits must be included in your gross income, regardless of your filing status. Any year where the sum of half your Social Security income plus all other income, including tax-exempt interest, exceeds $25,000 ($32,000 if you are married and filing jointly).
Q: What are the filing obligations for someone who receives Social Security benefits and lives outside the U.S.?
A: If U.S. Social Security benefits are the only source of your worldwide income, you may not need to file. Whether or not you need to file will be determined by the filing thresholds associated with your filing status. Here are the points related to common filing statuses:
$25,000 - for anyone filing as single, as head of household, as a qualifying widow or widower with a dependent child, and for married individuals filing separately who did not live with their spouse at any time during the year.
$32,000 - for married couples filing jointly.
$0 - for married persons filing separately who lived together at any time during the year.
If you have any other income from the U.S. or worldwide, you will likely need to file a tax return even if you are below the threshold for your filing status given above. The tax due, if any, will be based on your gross income from all sources. However, your Social Security benefits will only be partially taxed.