0 - What is FICA tax and who should and should not pay?
Federal Insurance Contributions Act tax, or commonly known as FICA tax, also called payroll tax, is the tax paid to Social Security Administration (SSA) via the payroll process. The company pays half, and withholds other half from the employee.
The IRS says:
… allow an exemption from social security/Medicare taxes to alien students, scholars, teachers, researchers, trainees, physicians, au pairs, summer camp workers, and other nonimmigrants who have entered the United States on F-1, J-1, M-1, Q-1, or Q-2 visas and who are still classified as NONRESIDENT ALIENS under the residency rules of the Internal Revenue Code.
Foreign students in F-1, J-1, M-1, Q-1 or Q-2 nonimmigrant status who have been in the United States more than 5 calendar years are RESIDENT ALIENS and are liable for social security/Medicare taxes (unless they are exempt from FICA under the “student FICA exemption” discussed below).
1 - How do I pay the FICA tax erroneously not withheld?
Go to your HR department of your company and make a confession, they will correct their payroll to pay their half and your half, and you write a check to reimburse your company.
2 - What do I do if the FICA tax is erroneously withheld?
You do it in two steps:
Step 1: Request refund from your employer
The first step is to request the refund from the employer, because the employer will need to get back their half. For most major employers with experience of hiring foreign workers, this is not a problem, and most often the problem is solved right here. If the employer denies the request, please ask the employer to write a letter explaining the reason why it won’t do, and to state that it will not seek refund in the future. This is needed because when you make the request through IRS, IRS will need to know that the refund will not be doubly requested.
Step 2: Request refund by yourself
If your employer refuse to refund the FICA taxe erroneously withheld from you, you should update your resume to find a new employer.
The following is a list forms and attachments you would need to request refund yourself:
- Form 843 completely filled out and signed.
- Form W-2 showing the amount of social security andMedicare taxes withheld.
- A copy of your visa showing your F-1 student status.
- Form I-94 showing your current status.
- I-94 travel record.
- Form I-766 (employment authorization document) showing permission to work in the US.
- Form 8316 with line 6 completed and employer’s letter in step 1.
- Form I-20 for F-1 students or Form DS-2019 for J-1 students.
Send Form 843 (with attachments) to:
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0038
Check Publication 519 for current address.
This is a lengthy process because the government job is secure, they do not need to work as hard as we do. I sent in a request in May 2019 for a client, and it took nearly a year for the refund to be issued, and this is pre-pandemic of 2019. Experience shows that if you keep thinking of it, it will never come. Only after you forget about it, it will come. So as soon as you send in the request, it is better not to think about it.
As you see that the FICA tax refund is a special process separate from the income tax return. The income tax return touches FICA tax only in special cases:
- Excess social security tax withheld by multiple employers
- Insufficient FICA taxes withheld for tipped employees - employers cannot withhold taxes from the tips paid by the customers.
- Additional Medicare Tax for people with high income (200,000 for single and 250,000 marrried in 2020).
Income tax return does not cover the situation where the FICA tax erroneously withheld by the employers. You can go ahead filing your tax return, and if in the future the employer send you a correctly Form w-2 with updated FICA tax amounts, you do not need to amend your tax return either.