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What Do I Need to Do About Self-Employment Taxes if I Have Already Paid into a Foreign System?

Q&A: I’m self-employed and confused– what do I need to do about US Self-Employment taxes if I have already paid into a foreign system?

Q: I have been in Finland for 12 years, and I am returning the the United States and filing previous year’s taxes. I am confused by the apparently contradictory information that I find in the the 2009 IRS publication 54, page 11, titled “Exemption from Social Security and Medicare Taxes”.

I paid all my self employment taxes in Finland dutifully all the years I lived there, and understand the Totalization Agreement with Finland means I don’t have to pay them again in the US, but my accountant says I have to pay the 15.3% Self-Employment tax.

Who is correct?

A: The basic rule is this – you must be paying into one system or the other (assuming there is a Totalization Agreement).

In your case, if you have been paying into Finland’s social system then you would not be required to pay Self-Employment tax on the income. You would just be required to pay income tax.

Please check out the SocialSecurity.gov overview of the Totalization Agreements by country (you can also find full text of the Agreements on the site). Keep in mind that these agreements only apply to the years spent abroad. Once you return to the US you will again be responsible to US system.

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