FICA taxes for a F1 student (resident alien)

[krissh1368]

Hi,

I am an F1 student and became a resident for tax purposes in 2017 and currently on STEM OPT. I recently realized that for the past 3 years (2017, 2018, 2019) tax return my employer did not withhold FICA taxes. I have reached out to them about this issue and they have fixed it going forward but are not willing to fix it retroactively. 

How can I fix this issue? Is their a way to re-file tax returns and pay my share of FICA taxes.

Thanks. 

[pk]

@krissh1368 , when did you come into this country with F-1  ( from your post it sounds like  you  were admitted  in 2012 ) ?  Was this is first entry for any reason ? Which country are  you from ?  Are you on extension of the F-1  or were there gaps in between  ( like  required Mil service  in your country  or similar ) ?  You were employed at the school during the year and at other places during summer breaks or what?

Generally though , you will find it hard for employers  to deal with  past FICA contributions  ( because their books have been closed ).  Also during OPT  most  places will not  withhold FICA ( because it is viewed  similar to residency / required  as part of the degree ) .

[krissh1368]

@pk , Yes I moved to US from India in 2012 for PhD. There have been no gaps, I have F1 extended. I graduated from the University in August, 2018 and since been working on OPT and subsequently STEM-OPT. I have been employed by university from 2012 -May 2018 by the university. In between I had an internship in 2017-outside university.

My assumption is my employer should have withheld my contributions to FICA for 2017 summer internship and the employment after graduation in August, 2018. But the employer did not, so I am trying to pay my share. Any suggestions? 

[pk]

@krissh1368 

(a) you have the option of paying in the FICA @15.3% of your earnings ---  there is generally no penalty.  If your employer did not withhold  your contribution, they also did  not pay their share of the FICA-- hence  it is unlikely  they will admit failure because  if you complain to the IRS, there  will be fine levied on the institution and hence  there may be indirect / direct consequences.  

(b) If you have use TurboTax or similar tax software, it should have warned you that there is no FICA  contribution reported --- did it  or  your W-2 showed   boxes 3, 4, 5, 6 all blank and hence no warning ?

(c) I don't believe your  should be  paying FICA  because you were  "student"  and still are "student" and immune from FICA  contribution.

(d) below I attach an analysis  by IRS lawyers on the subject:  

https://www.irs.gov/government-entities/federal-state-local-governments/student-fica-exception

" In general, FICA tax applies to wages paid to an employee on account of employment. IRC Section 3121(b)(10) excepts from FICA tax service performed in the employ of a school, college, university (institution), or a section 509(a)(3) organization organized and operated exclusively for the benefit of that institution if the service is performed by a student who is enrolled and regularly attending classes at the institution.

The student FICA exception does not apply to services which are covered by an agreement to provide social security coverage under section 218 of the Social Security Act (section 218 agreement). IRC Section 3121(b)(7) (E). A section 218 agreement may apply to students at a secondary school, as well as to students at an institution of higher education.

The exception applies only to an employee who has the status of a student.  An employee who performs services “as an incident to and for the purpose of pursuing a course of study” at the institution for which the services are performed has the status of a student for this purpose. Section 31.3121(b)(10)-2(c). 

Rev. Proc. 2005-11, 2005-1 C.B. 307, sets forth new guidelines for determining an educational institution and whether an individual is a student at an institution of higher education (institution) for purposes of the student FICA exception. In brief, an individual who is a half-time undergraduate student or a half-time graduate or professional student (half-time student) will qualify for the student FICA exception, provided that the individual is not a professional employee of the institution. The meaning of these terms is as follows.

In addition to being an “institution of higher education”, the employer must be a school, college, or university (SCU) within the meaning of section 3121(b)(10). The SCU primary function is the presentation of formal instruction, it normally maintains a regular faculty and curriculum, and it normally has a regularly enrolled body of students in attendance at the place where its educational activities are regularly carried on. (Treas. Reg. Section31.3121(b)(10)-2(c)). It may also be an affiliated Section 509(a)(3) organization with respect to the SCU.  "

Is there more I can do for you ?

Namaste

pk

[krissh1368]

@pk , Thanks for the reply.

I have few more questions based on your reply.

a) if I go with option a) why should i pay 15.3%, shouldn't i be paying only my share? Should i using form 8919 to amend?

b) No, W2 had blanks for boxes 3,4,5,6. Hence no warning.

c) Not sure about being immune to FICA Please this DHS, https://studyinthestates.dhs.gov/stem-opt-hub/stem-opt-frequently-asked-questions

"It depends. Under current tax laws, if your STEM OPT participant is exempt from payroll taxes, you save an amount equal to 6.2 percent of the STEM OPT participant’s salary up to the taxable wage base and an additional 1.45 percent of the total salary that would have been your contribution to the Social Security and Medicare trust funds. STEM OPT participants generally are not subject to FICA taxes or Social Security and Medicare contributions until after the first five calendar years that they hold an F-1 nonimmigrant status, but many STEM OPT participants will already have accrued such physical presence and thus will be subject to FICA taxes."

d) I was not employed by an university after graduation and also I am not attending classes.

I am really confused about this.

[pk]

@krissh1368 , 

FICA contribution is 15.3% -- generally shared 50-50  by the employer and the employee.   The fact that your employer considered you a "student" means that they did not contribute their own share either.  So to keep the system happy ( that is  for purposes of your retirement ) you can pay in the 15.3% or you can  convince your employer to pay his/her share   ( a very unlikely event ).  It may be easier  to just let the sleeping dog sleep.

USCIS / DHS does not  determine tax rules and regulations --- therefore I sent you quote from the IRS lawyers and as long as you met the conditions called out you should be immune from FICA.  It is possible that all sides made a mistake but trying to correct it may become itself an issue , not the least  of which is that  your employer  would look real bad  ( even may be fined  ) -- therefore  I would suggest leaving it alone.   IRS generally will not question this unless we are talking about Thousands of dollars  in fines and taxes ( it cost them quite a bit to collect  taxes/penalties) and if by some chance your 2018/2019 gets  selected  for a full audit ( an unlikely event but definitely possible ), you could then explain the mistake and let them  take action/settle -- that way you will not make your employer unhappy ( especially since he is changing and collecting/contributing FICA here onwards.

Namaste

pk

[krissh1368]

@pk , got it. thank you.