Working in Los Angeles?
Expat Los Angeles: Tax and Social Security
The USA is a low-tax economy. Income tax, although paid on both a federal and state level, is therefore also relatively low. Nevertheless, everyone working in the USA, employees and employers alike, needs a Tax Identification Number. In most cases, however, your Social Security Number simply functions as your tax number as well.
Do You Know Your Tax Status?
As a foreigner working in Los Angeles, you need to find out whether you qualify as a resident or non-resident alien for US tax purposes. This helps you determine whether you need to file a tax return at the end of the financial year. Please note, however, that these tax categories have nothing to do with your visa category. For instance, although you may be working in Los Angeles on a nonimmigrant visa, you can still be classified as a resident alien for tax purposes.
While the case is clear for expats with an immigrant visa, those on a nonimmigrant visa should take the Substantial Presence Test on the website of the IRS. In broad terms, as the name suggests, you qualify as a resident alien for tax purposes if you have been present in the USA a certain number of days in the past three years, including the current year.
As a resident alien, you are taxed like any other US citizen and must therefore file a tax return. For more information on where, when, and how to file your tax return, please consult the International Taxpayer section on the IRS website.
You can also read our Extended Guide on US income tax for expats to find out how to register with the IRS, calculate your taxable income and your income tax, and much more.
Tax Treaties: Does Your Home Country Have a Treaty with the US?
The USA maintains tax treaties with a number of other countries. If your current country of residence has entered into such a treaty with the United States, you may be taxed at a reduced rate, or even be entirely exempt from certain taxes from US income sources. You can find out whether such a tax treaty exists between your country and the US and read its terms and conditions in the IRS’ A to Z of Income Tax Treaties.
Don’t Forget to Get Your Social Security Number
As a foreigner working in L.A., you need to pay social security tax as well. You and your employer pay 6.2% tax each as well as 1.45% for Medicare which adds up to 7.65% of your salary. Social security contributions are automatically deducted and go towards any retirement benefits you may be entitled to from the time you spent working in the USA.
All employees in the US need a Social Security Number, which for most expats, as we alluded to earlier, also serves as their Tax Identification Number. If you are coming to the USA to both live and work on a permanent basis, you should request a Social Security Number when applying for your immigrant visa. For a detailed description of the necessary steps, visit the website of the Social Security Administration (SSA).
Expats on nonimmigrant visas, on the other hand, should wait ten days after their arrival in the US before filing their online application. This will allow for an easier and quicker online verification of your different documents and a consequently quicker processing of your application.
Social Security Agreements: Take a Look Before Paying Twice
The US maintains International Social Security Agreements with 25 countries, including several European countries as well as Canada, Australia, Chile, Japan, and South Korea. These treaties, also known as Totalization Agreements, eliminate double social security taxation on the same income for expats who would otherwise be taxed both in their home country and in the USA. Please visit the International Programs section of Social Security Online to find out whether your country has entered into such an agreement with the USA.
Are you curious to learn more about the social security system, about which benefits you qualify for, and social security agreements? Take a look at our article on US social security for more information.
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