What is Totalization Agreement?
Bilateral agreement between countries to coordinate Social Security coverage and prevent double taxation of social security.
Definition
A Totalization Agreement is a bilateral treaty between the United States and another country that coordinates Social Security coverage to eliminate dual social security taxation and help workers qualify for benefits. Under these agreements, workers are generally covered only by the country where they work, but exceptions apply for temporary assignments. The US has agreements with about 30 countries including Canada, UK, Germany, and Australia.
Who Needs to Know This?
US workers employed abroad, foreign workers in the US, and employers of international workers who need to determine social security coverage and avoid dual contributions.
Key Deadline
Certificates of Coverage (COC) should be obtained before starting foreign work
Potential Penalties
N/A - provides benefits; without COC may pay double social security taxes
Related Forms
Common Mistakes to Avoid
- 1Not obtaining Certificate of Coverage before working abroad
- 2Paying into both countries' social security systems unnecessarily
- 3Not understanding the 5-year exception for temporary workers
- 4Confusing totalization agreements with income tax treaties
Related Terms
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