Do You Get Credit for Social Security when You Work Outside the U.S.?

If you work outside the U.S., whether you are subject to the U.S. social security system or the social security or equivalent system in the country where you work depends on your employer and your employment arrangements, and the country where you work.

According to the IRS, your work outside the U.S. would not normally be subject to social security tax in the U.S. But there are some exceptions. These include working on an American vessel or aircraft if you entered into your employment contract in the U.S. or the vessel or aircraft touches at a U.S. port while you are employed. Other exceptions include working for an American employer, or a foreign affiliate of an American employer, and working in a country that has a bilateral social security agreement with the United States.

The United States has bilateral social security agreements, or totalization agreements, with various countries. You can find a list of U.S. International Social Security Agreements on the Social Security Administration website. These agreements have two purposes. One is to avoid having to pay social security tax to two countries on the same earnings. The other is to fill in benefit gaps in social security protection if you have divided your career between the United States and other countries.

The Social Security Administration points out that the totalization agreements do not allow you to choose between being covered by the U.S. social security system or the social security system in the country where you work. The agreements do not change the provisions of the other country's social security law and simply exempt you from coverage under one of the social security systems.

If you are sent on a temporary assignment to a country that has a bilateral social security agreement with the U.S. you may be subject to the detached worker rule. According to this rule, if you are transferred by an American employer to work abroad for a period that is generally 5 years or less, you would continue to be covered by social security in the U.S.

If you are self-employed, you would generally be subject to the self-employment tax in the U.S., which is the equivalent of the Social Security and Medicare taxes, and would also be subject to the social security system in the country where you are working. But if the country has a bilateral social security agreement you would generally be assigned social security coverage in the country where you live.

If you are a U.S. citizen or resident, you are generally subject to U.S. income tax on your worldwide earnings. If you are self-employed you have to file Schedule SE for the self-employment tax. According to the IRS, if you are covered by the social system in another country, you should get a statement from the social security or equivalent agency in that country verifying that your self-employment income is subject to social security coverage in that country. A copy of that statement should be attached to your U.S. income tax return.

According to the Social Security Administration, if you were covered by a foreign social security system while working in a country that has a bilateral social security agreement with the U.S. your work credits in that country will be counted in the U.S. if they help you qualify for U.S. social security benefits. If you already have enough credits from your work in the U.S., the credits from the other country are not counted.

If your credits for working in another country are counted, you receive a partial social security benefit in the U.S. based on how long you have worked under the U.S. social security system. But your work credits are not transferred, so you may be eligible for social security benefits in the country where you worked, in addition to being eligible for social security in the U.S. You should check the requirements for claiming social security or equivalent benefits in the other country or countries where you have worked.

Sources:
Credit for work outside the United States, Social Security Administration
Instructions for Schedule SE (Form 1040), IRS
Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, IRS
U.S. International Social Security Agreements, Social Security Administration