Nearly all American workers have to pay a portion of their wages to the Old-Age, Survivors, and Disability Insurance (OASDI) program, better known as Social Security. This pension program is an important source of income for many retirees. Among elderly beneficiaries, 50% of married couples and 70% of unmarried recipients receive 50% or more of their retirement income from Social Security.
Dating back to the days of the Great Depression, Social Security benefits were created as part of a social safety net designed to reduce poverty and provide care for the elderly and disabled. Most American taxpayers do not qualify for exemption from Social Security taxes. However, they exist for a small number of people.
Who gets Social Security benefits?
First, let’s review who Is eligible for social security. Most people who receive Social Security are retirees who paid taxes supporting the program during their careers and now receive monthly checks themselves.
More precisely, Social Security benefits are paid to workers who have paid Social Security taxes for at least 40 “quarter coverage” or 10 years.
Social Security actually includes several payment programs. These programs include direct cash benefits, payments to surviving family members in the event of the nominee’s death, and assistance for people with documented disabilities who are unable to continue working.
Social Security is a pay-as-you-go system, in which current employees cover the costs of benefits provided to current recipients. The Social Security program automatically enrolls most American workers. Enrollment linked to Social Security numbers of workers and taxpayers within the US
Who is exempt from paying Social Security?
Members of certain religious groups may be exempt from Social Security taxes. To get the exemption, they must relinquish their rights to benefits, including hospital insurance benefits. They must also be a member of a religious sect that provides food, shelter, and medical care for its members, and conscientiously oppose receiving private death and retirement benefits.
Most foreign students, scholars, teachers and researchers are exempted if they are immigrants and non-resident foreigners. Foreign nationals working in the US for a foreign government (for example, as a diplomatic or consular official) are also not required to pay. State and local government employees covered under a public retirement plan are not required to pay twice as much by paying into Social Security.
Self-employed workers who make less than $400 a year don’t need to worry about paying Social Security taxes.
Neither group on the other end of the income spectrum. The current rate is 6.2% tax on both the employee and the employer for a total of 12.4%. But high-income individuals are exempt from paying taxes on income above $142,800 for 2021 and $147,000 in 2022. This reduces their overall Social Security tax liability.
how to get discount status
Joining an officially exempt group may require an application to the IRS. Taxpayers who want to qualify for a religious exemption will usually have to apply and specifically ask the IRS for an exemption from paying self-employment taxes. For example, the IRS regularly offers exemptions to ministers, members of the clergy, and practitioners of Christian Science.
Members of a religious order who have taken an oath of poverty are exempt from paying self-employment taxes on work done for the order and are not required to request a separate exemption. However, if the order elects to be covered under Social Security, taxes will apply. Taxes will also apply for any act done outside the order.
As these examples demonstrate, obtaining exemption from paying Social Security taxes requires specific action by the taxpayer and special permission from the IRS. There is no legal way to withhold paying Social Security taxes without applying and getting approval or becoming a member of an already exempt group.