Social Security and Medicare Deduction from Payroll

Hi, I'm currently working in the US on a TN Visa. Given that I'm a Canadian and not a US citizen, I find it unjustifiable to get deducted on soc sec and medicare from my payroll as I won't be entitled to these benefits anyway. Is there anyway that I can get these deduction back? If so, what are the process that I have to go through. Thx in advance.

I very much doubt it. The only one contestable really is the Medicare deductions. In a roundabout way you *are* eligible for the Social Security because Canada and the US have a trade treaty, and once you reach retirement age, if you're back in Canada by then, your year(s) worked in the US and payments to Social Security will factor into your CPP cheques. And vice versa if you happen to stay in the US and retire there, any contributions you've made to CPP will be considered in your Social Security cheques.

Medicare is just a necessary evil payment like the rest of the taxes. You could probably try to have it reimbursed, but it is very unlikely you'll get any of it back.

Trust me I understand your pain. I have medicare deducted from my weekly paycheque as well, but as a sponsored immigrant, I'm not eligible to use it either.

Thanks for the prompt reply, Reba. I guess there's no way out but to live with it but then like you said we will be getting the social security when we retire back in Canada, so we'll eventually enjoy that portion. But medicare on the other hand, is a different story. Anyhow, Thanks for your info. Really appreciate it.

Me = Shocked,
12.4% for Social Security
2.9% for Medicare

W-O-W!

I was just trying to work this out yesterday, because I worked in the US ages ago and had deductions made, but I've lived in the UK and Canada since then. Technically either (a) you will get some sort of tax treaty benefit or (b) your Social Security benefits will be paid to you directly from the US when you qualify for them.

HOWEVER, and I discovered this yesterday, you MUST keep the IRS updated as to your address, on Form 8822. If you leave the country, your employer will not advise them of your change of address abroad. If the IRS don't know you are overseas, neither does the SSA, so applying for tax treaty benefits, CPP transfers, etc. is made very much harder. The SSA use the address records of the IRS, so you must keep the IRS up-to-date on your current address.

Also you won't get your social security statement every year if the SSA don't know your address so you have no clue what to apply for under any tax treaty, and you won't know what funds you are entitled to when you retire.

I've only just advised them of my current address and I haven't paid deductions in 12 years so I'm fascinated to know what my statement will say! Zero, I suspect.

I was just trying to work this out yesterday, because I worked in the US ages ago and had deductions made, but I've lived in the UK and Canada since then. Technically either (a) you will get some sort of tax treaty benefit or (b) your Social Security benefits will be paid to you directly from the US when you qualify for them.

HOWEVER, and I discovered this yesterday, you MUST keep the IRS updated as to your address, on Form 8822. If you leave the country, your employer will not advise them of your change of address abroad. If the IRS don't know you are overseas, neither does the SSA, so applying for tax treaty benefits, CPP transfers, etc. is made very much harder. The SSA use the address records of the IRS, so you must keep the IRS up-to-date on your current address.

Also you won't get your social security statement every year if the SSA don't know your address so you have no clue what to apply for under any tax treaty, and you won't know what funds you are entitled to when you retire.

I've only just advised them of my current address and I haven't paid deductions in 12 years so I'm fascinated to know what my statement will say! Zero, I suspect.

Steve, I've just joined and am impressed with your knowledege. Since 1967 I have been a LPR in US. When I retire and move back to Canada can my US social security payments be direct deposited into a Canadian back account (or mailed to me)? Do I have to file tax returns in the US and Canada? I read something about denouncing my LPR but I don't want to do this because I may want to live in the US as well. I'm not sure what the tax treaty benefit is about. Why would I want to use this if all my income has been in the US?
Thanks, Denyse

In this case tax treaty benefits exempt you from US withholding. The SSA is supposed to withhold 30% on 85% of the income from social security but if you claim a tax treaty benefit (Form 8840 or 8833) there is no withholding (so claim it, obviously).

But you still get taxed on it at the marginal rate of income tax, and you still have to file a 1040NR and an 8840 or 8833, depending on the circumstances.

You can't remain an LPR I'm afraid if you move to Canada, because if you did you would face dual taxation. Under the tax treaty a claim of permanent residence makes you subject to tax in that jurisdiction, so if you are an LPR in the US and you live in Canada, you are subject to tax in both places and there's no way around it.

If you want to retain the right to reside in the US at some future point, you should apply for US citizenship.

This subjects you to a different tax situation because US citizens must file a 1040 every year even if they are non-resident. You would be taxed on your US source income (e.g. social security, but excluding bank interest, if you file Form W-8BEN) and claim a foreign tax credit in the US (Form 2555) for any tax paid in Canada on other worldwide income.

The only major downside to doing this is that the foreign tax credit in the US maxes out at $85,700 (last year) so any income you received above that would be subject to dual taxation.

So basically, if you reckon your income in retirement every year will be under that limit, apply for US citizenship. If you reckon it will be over that amount, you'd have to give up your LPR status.

Note that long-term residents of the US (8 years or more in the last 15 years) have to file tax paperwork for ten years anyway after they give up their status in the US and can still be taxed on US-source income, so in your situation I'd say there are only going to be trivial benefits to not applying for US citizenship. Basically it saves you some paperwork if you live into your mid-70s, unless of course you're still earning heaps then.

Read the instructions for Form 1040NR.

As for how you receive the payments from the SSA, I think you have to use a US bank account. Better to do it that way anyway because of the fluctuations in exchange rates.

Hi All,

In regards to this Social Security deductions. My wife is on a H1B, will she be entitled to these earnings when she retires one day ? Whether it be in US or Canada? Only reason I'm asking is because I know a few Indian people(H1B holders) that were sent back to India and lost all their deductions. I guess as Canadians, these work visas really don't make a difference in terms of social security, correct ?

thanks!

The US and Canada have an agreement that other countries don't. I do believe that any contributions made to Social Security, can be gained even after one has moved back to Canada. You won't get them until after legal retirement age (which in the US keeps going up, and they're thinking about raising again!), but she should be able to have access to it, and it can be added to her CPP payments when she's eligible.

There's a totalization agreement (i.e. you get the total of your CPP and Social Security contributions) between the US and Canada, just make sure the Canadian and US authorities know your current address and through the years you've filed all the right tax paperwork at the right time.

If you look on the SSA website there is a detailed description of how it works.

What visa you're on isn't really all that important, this is a tax issue.