Foreign social security tax

[manyhappyreturns]

TP from the UK is a US resident (green card) and is a self-employed financial advisor with clients in the US, UK and other countries. He pays UK National Tax which is SE tax equivalent and has done so his whole working life He just moved to the US less than 2 years ago. He and his wife had a house built and they consider the US their home. So he is basically paying into social security in both countries. He is almost to the age of receiving benefits from the UK, but will never have sufficient funds paid into soc sec in the US because he just moved here. I totally do not know how to handle this situation, so I could really use some advice. Thanks!

[Koss]

Reciprocity/Totalization

Start here:

http://www.ssa.gov/international/Agreement_Pamphlets/uk.html

Good luck.

BMK

[manyhappyreturns]

BMK, Thank you so much! This is what I was looking for but couldn't find. This whole process will surely take longer than a week, so it's time to file an extension and relax a bit (yeah, right!). At least this is one less thing that has to be done in the next few days.
Linda

[Koss]

Foreign SE tax

Extension is probably the way to go.

Here's how it will probably shake out:

He probably does not have to pay the UK National Tax on income that he earns while living and working in the USA. That's really a question for an accountant in the UK. I'm engaging in educated speculation here.

He will have to pay self-employment tax here in the US.

While he is living and working here, he will accumulate some credits in the US social security system. You are almost certainly correct that he won't accumulate enough to qualify for US social security benefits under the ordinary rules. But he will in fact be "paying into the system."

When he reaches the appropriate age, he will go through a special process to claim retirement benefits under the totalization agreement between the US and the UK.

Only one of the two countries will pay benefits to him. But the benefits will be calculated based on his lifetime earnings in both countries. The country that actually pays benefits gets reimbursed on the back end by the other country.

Don't ask me which country will actually pay his benefits. I have no idea whether it is the country that has the lion's share of the benefit obligation, or the country where he is actually living when he begins drawing benefits, or the country of which he is a citizen.

There's certainly nothing wrong with doing an extension to explore this.

But his US tax return for 2011 is probably going to be very ordinary. If he was self-employed in the US, and he is a resident alien, he won't escape from Schedule SE.

BMK