Question: Laura is a U.S. citizen and is employed by a foreign hospital in Jamaica, where she works as a physician. Is she required to pay U.S. FICA taxes on the wages she earns working for the hospital? Would a totalization agreement between Jamaica and the U.S. have any impact on her requirement to pay Social Security and FICA taxes on the Jamaican wages?
Answer: No. She is not required to pay U.S. FICA taxes. A U.S. citizen or resident alien employed outside the U.S. by a foreign employer is generally not subject to U.S. FICA taxes unless there is a bilateral social security agreement (also known as a totalization agreement) in place between the U.S. and the foreign country. Since there is no bilateral social security agreement between Jamaica and the U.S., the related provision does not apply to her and has no impact on her U.S. taxes.
A totalization agreement has two purposes. First, it eliminates double social security taxation. Second, it bridges the gap in benefit protection for employees who divide their employment between the U.S. and another country. If there is an agreement between the two countries, the U.S. taxpayer will be subject to either the U.S. FICA taxes or social security taxes in the foreign country, depending on the agreement.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.