Individuals employed outside the United States by a foreign employer are not generally subject to Social Security and Medicare tax withholding. However, an American employer with a foreign affiliate may file Form 2032, Contract Coverage Under Title II of the Social Security Act requesting that Social Security and Medicare taxes be withheld from the wages of individuals employed by the foreign affiliate who are U.S. citizens or U.S. residents within the meaning of Internal Revenue Code section 7701(b)(1)(A). Individuals employed within the United States by a foreign employer are generally subject to Social Security and Medicare tax withholding by the foreign employer. Revenue Ruling 92-106, 1992-2 C.B. 258 provides detailed information on this subject. Certain exceptions to mandatory Social Security and Medicare tax coverage are listed in IRS Publication 15, Circular E, Employer's Tax Guide. However, individuals employed in the United States by a foreign employer may be exempt from U.S. Social Security and Medicare taxes under the terms of a Totalization Agreement. Special rules apply to individuals employed by a foreign government or international organization. References/Related Topics Social Security Tax / Medicare Tax and Self-Employment Form 941, Employer's Quarterly Federal Tax Return, and Instructions Internal Revenue Code Section 3121 Income Tax Regulation 31.3121(a)-1 et seq. Publication 15, Circular E, Employer's Tax Guide Publication 51, Circular A, Agricultural Workers Tax Guide Revenue Ruling 75-485, 1975-2 C.B. 414 Revenue Ruling 92-106, 1992-2 C.B. 258 Totalization Agreement Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.
