Since the late 1970s, the United States has established a network of bilateral social security agreements that coordinate the U.S. social security program with similar programs in other countries. This article provides a brief overview of the agreements and should be of particular interest to multinationals and people who work abroad during their careers. If you have social security credits in the United States and Germany, you may be eligible for benefits from one or both countries. If you meet all the essential requirements under a country`s system, you will benefit regularly from that country. If you don`t meet the basic requirements, the agreement can help you qualify for a performance, as explained below. As far as workers are concerned, certificates issued by Germany must be kept in your employer`s files in the event of an examination by the IRS. Neither you nor your employer is required to provide a copy of the certificate to the IRS unless necessary. On the other hand, each year, self-employed workers must attach a copy of the German certificate to their U.S. income tax return as proof of the U.S. income tax exemption (self-employment).
This is essential, as self-employed workers typically pay about 15% of self-employment tax when filing their income tax returns in the United States. If you do not agree with the decision on your entitlement to benefits under the agreement, contact a U.S. or German social security office. The people there can tell you what you need to do to appeal the decision. In most cases, if your U.S. employer sends you to work for five years or less in Germany, then you and your employer will continue to pay U.S. Social Security taxes. On the other hand, if you work more than five years in Germany or if you have been hired in Germany, you contribute to the German social system.
Totalization agreements, also known as bilateral agreements, eliminate dual social security (a situation that occurs when a person from one country works in another country and has to pay social security contributions to the two countries with the same income). Any totalization agreement contains rules that aim to allocate insurance coverage to a work force in a country where the workforce is more economically related. Agreements generally guarantee that the worker pays social security contributions to only one country, provided that the worker and the employer meet the procedural conditions of the agreement for obtaining an exemption from the other country`s social security contributions.