If heading to the U.S. on an assignment, it’s important to consider whether you expect to be there for the short-term, or to permanently set up shop. Why? You will want to plan for social security tax payments and whether those should be made in your home or host country.
Most people are familiar with tax treaties – like the one that exists between the U.S. and Canada. But did you know the U.S. and Canada also has a social security treaty? It’s called a Totalization Agreement. It protects the benefit rights of workers that divide their career between Canada and the U.S. It also helps to avoid situations where workers and their employers are required to pay social tax in two countries on the same earnings. In short, this agreement helps to eliminate dual social security coverage and taxation. Plus, the worker usually gets to maintain coverage in the country they will have the greatest attachment.
So, if heading to the U.S., but only for a short time, consider getting a Certificate of Coverage. This may allow you to be exempt from U.S. Social Security Tax (FICA), if covered by the Canada-U.S. Social Security Agreement.
Got US tax and Canadian tax compliance issues? Contact Cross-Border Financial Professional Corporation – When Perspectives Matter!
Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on Linkedin and Twitter, or hang out on Facebook.
The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.