US Social Security Benefits for Non-Resident Aliens: Do They Get Taxed?
Feb 13, 2024Season 1Episode 2
GT Radio / Johnny Punish
Quick Hit from Global Thinkers - Recently I had a client for Global Thinkers Tax Services ask me about US Social Security Taxes for their “non-resident alien” wife who will soon be receiving their US Social Security Benefit.
They wanted to know;
Will that benefit be taxed?
If so, how much?
If so, how can they legally minimize or nullify the tax?
The short answer is YES! About 25.5% of the benefit will be withheld as “tax”. And yes, there is a way to minimize or even get that tax down to zero.
To be more specific, if you are a nonresident alien receiving retirement, disability or survivor benefits, SSA will withhold a 30 percent flat tax from 85 percent of those benefits unless you qualify for a tax treaty benefit. This results in a withholding of 25.5 percent of your monthly benefit amount.
Quick Hit from Global Thinkers - Recently I had a client for Global Thinkers Tax Services ask me about US Social Security Taxes for their “non-resident alien” wife who will soon be receiving their US Social Security Benefit.
They wanted to know;
Will that benefit be taxed?
If so, how much?
If so, how can they legally minimize or nullify the tax?
The short answer is YES! About 25.5% of the benefit will be withheld as “tax”. And yes, there is a way to minimize or even get that tax down to zero.
To be more specific, if you are a nonresident alien receiving retirement, disability or survivor benefits, SSA will withhold a 30 percent flat tax from 85 percent of those benefits unless you qualify for a tax treaty benefit. This results in a withholding of 25.5 percent of your monthly benefit amount.
Okay, let's get right to it. Recently, I had a client for Global Thinkers Tax Services ask me about Social Security taxes for the non -resident alien wife who will soon be receiving their U.S. Social Security benefit. And they wanted to know, will that benefit be taxed? And if so, how much? And if so, how can they legally maximize and nullify the tax? Well, the short answer is yes, you will be taxed. It's about 25 .5 % of the benefit will be held as what they call tax. And yes, there is a way to minimize it and get that tax to zero. So I'll go ahead and talk about that real quick. Now, but first of all, this is kind of how it works. The Social Security Administration will withhold a 30 % flat tax from the 85 % of those benefits unless you qualify for a tax treaty benefit. This results in a withholding of about 25.5 % of your monthly benefit. Okay, I know that doesn't sound fair. I get it. You know, I mean, yeah, I mean, you paid your taxes already and why are they taxing you again? Well, that's not an issue for this video because that's an issue you need to take up with the United States Congress because that's the law. So for interest of social justice and or, you know, freedom, we're not gonna talk about that. We're gonna talk about how to deal with the law as it is. So first of all, you need to definitely understand that you're gonna be taxed, okay? For example, if you get about $1 ,000 a month from Social Security, you're gonna bring back about $750, something like that, okay? All right, so just so you know for disclosure, my wife is actually a non-resident alien of the United States and she is already receiving Social Security benefits, so I have a first -hand knowledge of this and so I'm gonna share that with you, okay? Right, so why are the US Social Security benefits taxed for non -resident aliens anyway? I mean, yeah, it's ridiculous, right? So, it just sucks. But hey, that's the way it is, so deal with it, okay? Now, how are the non -resident aliens taxed on Social Security benefits? Well, it's called source -based taxation, and that's what they call it. So, it's based on your tax treaty with the government that you're in. So, for example, if you're in Mexico and you're a non -resident alien, Then by definition there is a tax treaty so the United States will tax you but Mexico cannot tax you and that's on their tax treaty But each tax treaty is different so you need to look it up wherever you are located in the world in other words wherever you are Legally resident in the world. That's really important because right now. I'm in Paris. I'm not in Mexico I'm at my Paris apartment that doesn't necessarily mean that Had I have anything to do with French? taxes I don't. I'm just here on vacation hanging out doing my PT here free thinking relocations around the world but legally my tax base residency is Mexico and so is my wife's. Okay so now you got that part. Okay all right so here we go so you need to check out your tax treaty wherever you are in the legal residence of your country whatever country that you're in okay right that's basically it now can you get a refund well yeah you can actually. You need to file a U .S. tax return first. You need to understand your tax treaty. And once you do, based on that, it's possible you can file a U .S. tax return and get those monies back, depending on your tax position. So you need to gather all your relevant documents related to Social Security benefits, including the forms sent by the SSA and any tax documents received by the U .S. government. Then you need to file your tax return. It's called a 1040NR. U .S. non -resident alien income tax return. Sometimes they have a 1040 NREZ, which is the easy version of it, but if it's more complex, use the long form. Okay, claiming a refund. Yeah, it depends on deductions and credits that applied it to that individual tax person, but it's definitely possible. So you'll just need to file your tax return, you need to wait on the tax return, see if the IRS processes it, and of course make sure that... They get through it. It takes delays. It takes time. And then if everything is good, you'll get your refund of the monies that you paid that they withheld from the tax from your Social Security benefit. Okay, so all in all you need to consult your tax professional. Actually, I do with global thinkers. I do tax returns every year for clients. So you can consult me if you'd like a free consultation. If not, please go to someone that you trust. I've been doing it for 25 years. I've been a an expat for 25 years since the 1990s. So I have a lot of experience in this area. But again, go to somebody you trust, someone you work with, and make sure you get the right information and maximize legally your taxable responsibilities. Okay, that's it for the quick hit on GT Radio today. I'm out.