Congressman Faleomavaega announced today that Western Samoans and others who qualify as bona fide residents of American Samoa are entitled to claim a refund of the 30% tax withheld on their social security benefits PROVIDED that they do not have other income that makes their benefits taxable under the Internal Revenue Code (IRC) section 86.
According to the IRS, a person is a bona fide resident of American Samoa IF, during the entire tax year, he/she:
• Does not have a tax home outside the Territory, and
• Does not have a closer connection to the United States or to a foreign country than to the Territory.
A person must also be present in American Samoa for at least 183 days during the tax year and:
• Establish a permanent home for himself or herself and his or her family
• Have social, cultural, and economic ties to American Samoa
• And be physically present for the year.
If the taxpayer is not a bona fide resident then he/she would be considered a nonresident alien for purposes of IRC section 871(a)(3) and he/she would not be entitled to the refund.
“Whether or not Western Samoans, or other foreign nationals, are entitled to claim a refund of their Social Security benefits tax withholdings has been an ongoing issue for years,” Congressman Faleomavaega said. “In fact, this is an issue that greatly affects many social security beneficiaries residing in American Samoa. Most taxpayers in American Samoa who are from the Independent State of Samoa, or elsewhere, do not realize that their Social Security benefits are being taxed 30 percent. Nor are they aware that if they qualify they are entitled to a refund of the 30 percent that is being withheld.”
“In accordance with IRC section 1441, the Social Security Administration withholds taxes on Social Security payments because a taxpayer may not be a U.S. National or a U.S. Citizen. However, if a taxpayer is able to prove that he/she is a bona fide resident of American Samoa then he/she may be entitled to the refund.”
“Taxpayers who believe they may be entitled to this refund should fill out the appropriate 1042 form which is accessible at www.irs.gov. Please contact my office at 633-1372 if you need further information or assistance,” the Congressman concluded.