Question

When is a nonresident alien subject to self-employment tax? A. The nonresident alien is always subject to SE tax if the self-employment earnings were earned in the U.S. B. The nonresident alien is only subject to SE tax if a totalization agreement allows for it. C. The nonresident alien is subject to SE tax when self-employment income is less that 25% of total U.S. income. D. the nonresident alien is subject to SE tax when self-employment income exceeds $400.

Answer 1

Correct answer is B.

The Internal Revenue Code does not impose the self-employment tax on the self-employment income of a nonresident alien, unless the self-employment tax liability is imposed under the terms of a Totalization Agreement.

The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be taken into account when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country