How can I avoid Social Security double taxation?

By
Bruno Bianchi
-

Question

DOUBLE TAXATION Social Security – USA

I’m looking for some advice in regards to my current tax situation.

I’m a US citizen, but a resident of Spain. I work freelance for an American company and make way under the 100K threshold, so I qualify for foreign tax exemption for income tax in the US, and have been paying income taxes and SS in Spain. 

However, my accountants in both the US and Spain say I’m not exempt from paying SS (self employment tax in the US) in that country. So essentially about 40% of my income will go to taxes.

I can’t wrap my head around the fact that I have to pay SS in both countries. Does anyone have experience with situations such as this, and found any (legal) solutions to avoid this?

Answers

These are the answers of some Facebook group members:

“There must be a tax treaty between both countries, you should check that out. If there is, then the taxes you pay in your home country would be credited on your Spanish taxes. These treaties are in place so people such as you and me (canadian) are not double-taxed.”

“This isn’t a taxation issue, but rather a Totalization Agreement issue. I don’t know what you need to provide, but as already mentioned, it applies to the social security situation, which is outside of the scope of the FEIE.”

“There is a “totalization” treaty. For SS, it controls which ONE nation you pay your SS taxes to. You should only be paying one. Basically, if you’re paying Spain, you provide the US with some kind of statement or evidence of it, and then you don’t have to pay the US SS taxes. When you go to retire, if it’s in the US, the time in Spain will be added in.

You need to find a better accountant because they should be figuring out how to make it that you only pay one nation, not both.”

“There is a tax treaty between the two countries… If you’re a tax resident of Spain, you just pay taxes here. Best to consult an accountant aware of international laws. I use Revolve Tax for my US tax return and he does a great job.. he works with a Spanish accountant that files for me in Spain too.”

“Suggest you read IRS Publication 54 Tax Guide for US Citizens and Resident Aliens Abroad. https://www.irs.gov/pub/irs-prior/p54–2019.pdf There is a section discussing totalization agreements and self employment tax. If you are paying Spanish social security then you don’t pay US self employment tax.”

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