What term do US and foreign countries use to prevent double social security and Medicare taxation of US citizens?

Prepare for the APA Certified Payroll Professional Exam with an extensive suite of flashcards and practice questions, each featuring detailed explanations and tips. Boost your confidence and knowledge for exam success!

The correct answer is totalization agreements. These are agreements between the United States and foreign countries designed to eliminate dual social security and Medicare taxation for workers who are subject to the social security systems of both the U.S. and another country. When individuals work abroad, they may be liable to pay social security taxes in the country where they work, as well as in the U.S. Totalization agreements help ensure that such individuals do not face double taxation on their earnings by allowing them to contribute to only one country's social security system, thereby streamlining their tax obligations and ensuring they receive benefits where applicable.

Other concepts, such as treaty benefits, tax treaty impact, and tax equalization plans, serve different purposes in tax law. While they address various aspects of international taxation, they do not specifically focus on the avoidance of double social security taxation in the manner that totalization agreements do. Thus, totalization agreements stand out as the specific solution for this particular issue faced by U.S. citizens working abroad.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy