We all pay it...it's that recurring column in each month's pay-stub: Social Security Tax. Have you wondered why you have to pay tax, where the money goes, who benefits from it and how the entire system works? Read on.

President Roosevelt signed the Social Security Act into law in 1935. This was the period just after the Great Depression. Many people needed aid, but there was no money to pay them with. So they formulated a system whereby workers and their employers pay a small percentage of their monthly earnings towards Social Security Tax. But this money does not idle in an account somewhere. It immediately goes to work in the form of benefit checks for the elderly and disabled. Thus, each generation of retiring workers is paid by the contributions of those working at the time and the system funds itself.

You pay approximately 6.2 percent of your earnings in Social Security Taxes. Your employer also pays about 6.2 percent for you. If you are self-employed, you pay the combined employee and employer amount of 12.4 percent. Cost-of-living adjustments and other factors are taken into consideration when calculating each year's Social Security Tax.

For every year that you continue to work, you earn "credits." You can get up to a maximum of four credits per year, depending on your income and other factors (decided upon by the Social Security Administration). Most people need a minimum of 40 credits to be eligible to receive benefits. Disability and survivor benefits require fewer credits.

A unique Social Security Number (SSN) is allotted to each person authorized to work and earn income in the U.S. It is vital to keep this number secret because it connects all your records and is the key to your benefits.

You should be receiving a Social Security statement in the mail every year. It details your earned credits to date and gives other information about your record. It is very important to ensure that this record is correct. Your name, date of birth and social security number as recorded with the Social Security Administration (SSA) must match the information provided by your employer. If there is any discrepancy, your employer will receive a letter from the SSA. Under such circumstances, it is your responsibility to supply the information and make certain that it is correct.

Today, about 36 million Americans of age 65 or older receive retirement benefits funded by those in the workforce. Soon, however, there will be more money paid out in the form of benefits than collected in taxes and it is projected that by the year 2042, the Social Security Trust Fund will run out unless steps are taken to alter the system.

Social Security pays retirement, disability, family and survivor benefits. A retiree's Social Security benefit is calculated using a complex formula. You can use the calculator on the Social Security Administration's website to figure out your own benefits.

Thus, for more than 60 years, America has provided security for its workers and their families. But what about those who are not citizens of this country? Every year large numbers of immigrants enter the U.S and obtain legal authorization to work here. Probably the largest percentage of working immigrants enters the U.S. with H-1 (specialty occupation) visa permits. [See useful links below for to other visa classifications.]

By definition, H-1 visas are issued for a total period of six years. An H-1 visa holder who contributes to the social security tax for six years will probably be unable to accumulate the 40 credits required to qualify for benefits in the U.S.

Foreseeing the unfairness of this situation, the U.S. has entered into "totalization agreements" with some countries that have social security systems similar to U.S.A. [see Table A]

Table A

Note : This list is subject to change from time to time.

Under this agreement, residents of these countries may have their Social Security deductions sent to their home country's program (rather than the SSA), and vice-versa. The main objective of this idea is to ensure that people do not end up paying social security taxes twice.

Many countries do not have a social security system at all. If you are a citizen of a such a country [see Table B], you must fulfill the following condition to qualify to receive benefits: the worker on whose record your benefits are based should have lived in the U.S. for at least 10 years or earned at least 40 credits under the U.S. Social Security system.

Table B

Note : This list is subject to change from time to time.

Since H-1 workers must leave the country after six years, it is difficult for them to qualify for benefits in the U.S. and (if they hail from countries listed in Table B) they are not contributing to any Social Security System in their home country either. So, the way things stand now, an H-1 worker leaving the U.S after six years may forfeit the amount paid in social security taxes.

It is important to understand that the Social Security Administration reviews each case individually and experiences may vary. If you are planning to leave the U.S. or have specific questions regarding social security, it is advisable to discuss your benefits with someone at your local Social Security office.

New governments, upcoming elections, changing policies, developing international relations, progressive talks - these and other factors could change the situation in the future.

Note : This article is for information purpose only. Since such information is subject to change from time to time, you should verify it with concerned authorities for the latest information.

Useful Links

• Social Security Administration: www.ssa.gov
  
  
• Social Security Administration toll free number: 1-800-772-1213
  Monday through Friday between 7 a.m. and 7 p.m
  
  Find your local Social Security Office:
  http://s00dace.ssa.gov/pro/fol/fol-home.html
  
  
• Social Security for Immigrants: http://www.socialsecurity.gov/immigration/
  
  
• Immigration classifications & visa categories:
  http://uscis.gov/graphics/services/visas.htm#H
  
  
• Visa classifications that allow you to work in the U.S.:
  http://www.socialsecurity.gov/immigration/visa.htm
  
  
• A history of Social Security: http://www.ssa.gov/history/
  
  
• Social Security Cards & Numbers:
  http://www.ssa.gov/history/ssn/ssncards.html
  
  
• Your Social Security Statement: http://www.ssa.gov/mystatement/