Does U.S.-taxed foreign income include social security tax?

[skyydaniel]

Another, more specific way of looking at this question is --> Is is possible to earn social security credits (in the U.S.) from foreign income (from Japan)?

Through the U.S.-Japan Totalization Agreement (https://www.ssa.gov/international/Agree ... japan.html), expats working for a Japanese company can avoid double taxation on social security/medicare taxes. Obviously, that's a good thing. But in order to qualify for "full" U.S. social security payments down the road in retirement (by reaching "40 credits), I need to pay about 1 more year's worth of social security taxes at some point.

I'm aware that the totalization agreement allows social security payments made to Japan to be carried over to social security in the U.S. in order to reach the minimum credits. But there are some drawbacks to this, which is why I'm researching to get more credits directly through paying social security tax in the U.S. from foreign income.

Without getting too technical, basically I'm trying to find out/confirm whether or not it's possible to somehow pay social security/medicare taxes solely through foreign income -- assuming the foreign income is taxed (the foreign income exclusion is not taken).

I've been searching for this answer but I can't find a straight answer. There's a lot of info regarding taxes when receiving benefit payments, but my questions is essentially about the possibility of opting-in to paying U.S. social security taxes for one year (while also paying the usual social security/other taxes in Japan as well. So, if I reported my foreign income on my U.S. tax returns, used the foreign tax credit so I still have U.S. taxed income for the year, would that give me U.S. credits for my social security?

I admit, this is a very boring question, but I'd appreciate if anyone has an insights on it!

[captainspoke]

First, connected to the other thread, I've been told that (and from a cursory look a while back) you can 'pay up' somehow and by doing so become eligible for medicare (but I think it then was for a higher monthly fee than a more normal retiree, e.g., someone who had been paying in for many years).

It's been a while since I looked at that, and at the time it was kind of an academic question--whether it was even possible--and not (if it was) what the deal looked like, the nuts and bolts.

I'm sorry, but I forget if this was medicare only, or if it was also connected to SS. (I only have 10-15 units, well shy of the minimum of 40, having never really worked in the US.)

**

Speculation: One avenue might be doing some online/remote work that pays you into a US account. I'm not doing it, but I think some of the china online tutorial companies pay into a US account--that's where many of their teachers are. VIPkid, DadaABC, something like that where, from here, you'd do online tutoring in the evenings and get paid for it into a US acct. It may be possible to construe this as working in the US--you'd pay self-employment tax and SS tax on it.

((And a totally unserious suggestion: I once wondered if I could 'lend/sell' my SSN to an illegal there in the US. Let them work there, faux legally using my number, and I'd eventually have 40 units. Naawww, nothing could go wrong with that...! ))

Good luck!

[skyydaniel]

First, connected to the other thread, I've been told that (and from a cursory look a while back) you can 'pay up' somehow and by doing so become eligible for medicare (but I think it then was for a higher monthly fee than a more normal retiree, e.g., someone who had been paying in for many years).

It's been a while since I looked at that, and at the time it was kind of an academic question--whether it was even possible--and not (if it was) what the deal looked like, the nuts and bolts.

I'm sorry, but I forget if this was medicare only, or if it was also connected to SS. (I only have 10-15 units, well shy of the minimum of 40, having never really worked in the US.)

Thanks for the tip on that. I searched and here's the key info regarding this topic, from Medicare.gov:

['Premium-free Part A'] vs ['Part A premiums']
"Most people don't pay a monthly premium for Part A (sometimes called "premium-free Part A"). If you buy Part A, you'll pay up to $471 each month in 2021. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $471. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $259."

sources:
https://www.medicare.gov/your-medicare- ... t-a-glance
https://www.medicare.gov/your-medicare- ... rt-a-costs

So, yes, it's possible to still get medicare without the full qualifying credits/quarters, but it comes with a price tag. Whereas most qualified individuals do not pay anything on this. Conclusion: there's no question that I should get the few credits I'm missing in order to fully quality -- in my case anyway.

Speculation: One avenue might be doing some online/remote work that pays you into a US account. I'm not doing it, but I think some of the china online tutorial companies pay into a US account--that's where many of their teachers are. VIPkid, DadaABC, something like that where, from here, you'd do online tutoring in the evenings and get paid for it into a US acct. It may be possible to construe this as working in the US--you'd pay self-employment tax and SS tax on it.

((And a totally unserious suggestion: I once wondered if I could 'lend/sell' my SSN to an illegal there in the US. Let them work there, faux legally using my number, and I'd eventually have 40 units. Naawww, nothing could go wrong with that...! ))

Good luck!

I was thinking the same thing. Basically try to find some online work that pays to a U.S. account so I could pay self-employment tax (and therefore also SS tax). I haven't heard of the sites you mentioned, so I'll add those to my notes. I'm already a university teacher in Japan, so to make it more interesting for me I'm kind of thinking about looking for something different than specifically teaching, maybe some kind of freelance writing, or possibly light design work. But I digress.

On your last idea, that's pretty funny, haha. Certainly a fun thought experiment! *note: please don't try this anyone XD

[TJKansai]

I was concerned as I only had around 30 credits and was in my 40s. I am not sure where I will end up after retirement, but wanted to cover my bases. Online work was an idea, but I ended up going a different way.

A friend told me his US accountant suggested he claim his part-time work in Japan as self-employment on his US tax return (not excluded, so taxable in both US and Japan). He did that, paid the social security taxes due, got his 40 credits and qualified. I am not sure if he is paying Part A/B or whatever though. He lives in Japan and I think Medicare is just a backup for him should he decided to spend time in the US.

I did the same thing, earning 4 credits a year for about 4 years, and now have my 40+.

Income of $5,640 in 2020 will get you 4 credits.

[_ouch_]

So, if you qualify for both the US and Japan social security payouts when you hit retirement, would you receive payments from both countries? Or only whichever country you are currently a resident of?

[captainspoke]

So, if you qualify for both the US and Japan social security payouts when you hit retirement, would you receive payments from both countries? Or only whichever country you are currently a resident of?

I know someone here who is collecting both, BUT was honest and his SS is reduced since he is receiving another pension. It's called windfall elimination, or something like that. It's to prevent someone like a teacher/policeman from qualifying for one pension, and then working another job to then qualify for SS. It incidentally affects expats.

Once upon a time, I think collecting both would have been possible, but these days, with the common and more freely exchanged tax and banking info between countries, that could be dangerous.

[TokyoWart]

So, if you qualify for both the US and Japan social security payouts when you hit retirement, would you receive payments from both countries? Or only whichever country you are currently a resident of?

My understanding is that the two SS offices actually work together to calculate your benefit. You may well receive money from both organizations and Japan doesn't decrease your benefit because you are receiving US SS but the US does reduce your benefit under the WEP (as mentioned by captainspoke) so that you don't benefit from the higher SS payout for those with lower lifetime income.

[_ouch_]

Well, if it sounds too good to be true, it probably is