If a U.S. citizen or resident alien works for a U.S. person, defined as a U.S. citizen, an entity incorporated or otherwise formed in the United States or an affiliate of such an entity that has entered into an agreement with the U.S. government, the employer will pay the employer portion of the social security tax, and the employer will withhold the employee portion of the social security tax.

If none of the foregoing exceptions applies, then a worker, who has fewer than 40 credits, fewer than 35 years of income or otherwise wants to continue contributing to U.S. social security, has another option, which is to be self-employed.  If a worker is self-employed, then the worker is required to pay U.S. social security taxes to the U.S. Treasury.

For 2009, the employer and employee each pay 6.2% on up to $106,800 of income in social security taxes and 1.45% of all income in Medicare taxes, and, subject to offset by income tax provisions, a self-employed person pays 12.4% on up to $106,800 of income and 2.9% on all income.  Self-employment tax can be calculated on Schedule SE to Form 1040.  The self-employment tax is a higher percentage of income because the self-employed worker must pay both the employer and employee portions of social security and Medicare taxes.

A U.S. citizen or resident alien living outside the U.S. is required to pay self-employment tax if he earns at least $400 in net earnings as a self-employed person.  Self-employment tax must also be paid on certain partnership income and certain guaranteed payments.  Any self-employed U.S. citizen or resident alien living outside the United States must usually pay self-employment tax without reduction by the foreign earned income exclusion, which reduces the income tax.

Thus, there are several ways of continuing to make contributions to the U.S. social security retirement system.  None of them are voluntary.

Taxability and Reduction of Retirement Benefits

If a worker is already retired and receiving U.S. social security retirement benefits, then living and working in Thailand can have two effects on the worker's benefits.  First, the social security retirement benefits may be subject to U.S. federal income taxes.  Second, benefits may be reduced.

If the worker is a U.S. citizen or U.S. resident, up to 85 percent of the worker's social security retirement benefits may be subject to U.S. federal income taxes.  For 2009, for a retiree filing as an individual, taxes may be payable on 50% of the retiree's social security retirement benefits if his combined income is $25,000 to $34,000 and up to 85% if his combined income is over $34,000.  The corresponding income limits are.  Combined income means adjusted gross income plus nontaxable interest plus one-half of social security retirement benefits.

If the worker has retired before full retirement age, then retirement benefits are reduced until he reaches full retirement age if the retiree's income exceeds specified limits.  Retirees who work for a U.S. employer and thus continue to pay social security taxes are treated differently from retirees work for someone other than a U.S. employer.

If, before full retirement age, a retiree works for a U.S. employer or is self-employed and is thus in each case subject to U.S. social security taxes, the reduction in retirement benefits is based on the amount of the retiree's income.  For 2009, the earnings limit for retirees under full retirement age is $14,160.  For every $2 of additional income, the social security retirement benefit is reduced by $1.  The earnings limit for persons in the year they reach retirement age (until the month the persons reach retirement age) is $37,680, and for every $3 of additional income, the social security retirement benefit is reduced by $1.

If, before full retirement age, a retiree works outside the U.S. in employment or self-employment that is not subject to U.S. social security taxes, retirement benefits are withheld for each month in which the retiree works more than 45 hours, without regard to income, because the worker will not be considered retired.  If the worker works fewer than 15 hours a month, the worker will be considered retired.  .  Work for this purpose may include having an agreement to work but not working because of vacation or illness or receiving income as the owner or part-owner of a trade or business even if the retiree does no actual work in the trade or business.

Full retirement age is 66 for people born in 1943, gradually increasing to 67 for people born in or after 1960.  There are special rules for the year in which a retiree reaches full retirement age.

Due to its length, this article is very limited in scope.  This article does not cover, among other things, persons with pensions from work not subject to social security tax, such as government jobs, or income earned by ministers or other employees of churches or other religious organizations, or spouses or dependents and survivors, and may other factors that may affect a particular person's rights and liabilities under the U.S. social security program.  In addition, it does not cover Medicare or state taxes.

N.B.  This article is intended for general information purposes only and not to provide legal advice.  The social security and income tax laws are very complex and frequently change.  Consult a lawyer to find out how the laws and rules apply to your specific situation.