Monthly Archives: March 2019

Federal Taxation of Old Age, Survivors and Disability Insurance Relief

By Coleman Jackson, Attorney, CPA
March 15, 2019

Federal Taxation of Old Age, Survivors and Disability Insurance Relief


Internal Revenue Code Section 3101 imposes on the income of every individual a federal tax equal to 6.2 percent of the wages received by the individual with respect to employment.  The Code also imposes a 1.45 percent hospital tax on every individual who receives wages regardless whether the wages are earned inside the United States or outside of the United States.  With the exception of corporations, trusts and estates, the Code imposes an additional .9 percent tax on wages received by individuals.  These tax assessments constitute employment or payroll taxes.



International Social Security Agreements between the United States and certain foreign countries could waive or relieve certain taxpayer citizens of foreign countries with agreements under Section 233 of the Social Security Administration Act.  These International Social Security Agreements are known as ‘totalization agreements’.   They are designed to give relief to workers who work overseas for part of their careers and pay social security related taxes to a foreign government.  Likewise totalization agreements are designed to give tax relief to temporary foreign workers in the United States who are required to pay into the U.S. Social Security System.  Totalization Agreements’ purpose is to limit old age, survivors and disability insurance type taxation to the country where the work was done.



The intent of these internal social security agreements are clear; but, nevertheless,  tax disputes sometimes arise with respect to the nature or proper characterization of the taxation in the country with the totalization agreement.  These International Social Security Agreements cover social security related taxes.  It can be particularly vexing with respect to taxes enacted by the parties after enactment of the particular totalization agreement.   Are those later enacted taxes ‘social security ‘related or not?  The legal issues in these disputes, which sometimes are litigated in court, are whether the particular tax falls within the ambit of the totalization agreement or understanding of the parties.   Courts give great deference to the political views of the United States and the foreign government officials.  The totalizaiton agreement text is read in light of the official views of the respective government officials.  Taxpayers with old age, survivors and disability insurance taxation disputes covered under a totalization agreement should, if possible, seek help from respective government officials.  The actual text of the particular International Social Security Agreement is critical in resolving legal disputes.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432.