US-Can social security tax agreement

kal2 · Post by **kal2** » Mon Sep 12, 2011 8:44 am

Hello. The information on this social security tax agreement seems to suggest that as regards an individual's self employment earnings, the individual 'can' be exempt from these taxes in one country or the other (depending on where they live/work). Does this mean that a person with self-employment income can contribute regarding those earnings in the US, while being exempt from contributing to US social security regarding earnings from regular employment (working for a third party) in Canada during the same years?

nelsona · Post by **nelsona** » Mon Sep 12, 2011 10:17 am

The issue is the income.

The income is only subject to one social tax. So, yes, your wages will ALWAYS be social taxed where the work is performed, while your SE income will only be social taxed where you live. So the exemption pnly applies to SE income.

in your example, you will always pay CPP only on Cdn wages, regardless of where you live and what other type of income you have.

kal2 · Post by **kal2** » Mon Sep 12, 2011 11:10 am

So, to boil this down to my level: You are saying that even if Canada does not include SE in its social tax system, or if a US citizen working in Canada maxes out on the coverable earnings, the US-Canada exemption agreement prevents the US citizen from voluntarily paying US social taxes on either employment or SE earnings not covered in Canada by virtue of caps or exclusions. ??

nelsona · Post by **nelsona** » Mon Sep 12, 2011 12:37 pm

Wages: FICA/CPP can only be levied on wages earned within its borders, or outside (not canada or US) if no agreement exists

SE: you technically can pay FICA and CPP, if you live in one country and earn income in the other, but you would need to be taxable in both.

You question asked about opting out of FICA on wages earned in canada. No need to opt out: you pay CPP and not FICA without choice.