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Social Security Tax And Employer Withholding: Resident And Non-Resident Aliens



Social Security Tax And Employer Withholding: Resident And Non-Resident Aliens

Must You Pay Social Security and Medicare Tax?

Nonresident aliens who are F-1, J-1, M-1 or Q-1 visa holders are not subject to social security and Medicare taxes (FICA) on services are performed to carry out the purpose for which they are admitted to the United States [IRC sec. 3121(b)(19)]. This generally includes on-campus work for which authorization is granted on Form I-94, Arrival and Departure Record, or Form I-20, Certificate of Eligibility for Nonimmigrant Student Status.

A nonresident alien admitted to the US as a student is not permitted to work off campus for a wage or to engage in business unless given approval by the U.S. Citizenship and Immigration Services (CIS). This should be noted on the student’s copy of Immigration Form I-20, or Form I-688B, Employment Authorization Document.

Off-campus work due to severe economic necessity or for optional practical training is considered by the IRS to qualify for the exemption. The IRS does not consider other off-campus work performed by a nonresident alien student to be performed to carry out the purpose of a student visa.

Resident aliens, as well as nonresident aliens who are F-2, J-2, M-2, Q-2 or any other types of visa holders, are not exempt from FICA taxes as nonresident aliens. However, IRC section 3121(b)(10) provides an exemption from FICA for services performed in the employ of a school, college, or university, if the service is performed by a student who is enrolled and regularly attending classes at that school, college or university.

Therefore, international students who do not qualify for the exemption for nonresident aliens might be exempt under this provision. On the other hand (just to add a bit more to the confusion), the law allows states to provide Social Security coverage for services performed by students for the public school the student is attending under agreements established with the Social Security Administration.

If a state has exercised its option to provide for coverage of student services, section 3121(b)(10) of the Code provides that those services will not qualify for the student FICA exception. If you wish to read the official announcement from the IRS on who might qualify for this student exemption, here is a link to the ruling: Rev. Proc. 98-16.

How To Obtain A Refund

If FICA has been withheld from your wages by mistake (look in box 4 of your W-2), you should first ask the employer who withheld the tax for a refund. If the employer does not grant a refund, a refund can be claimed from the IRS on IRS Form 843. Follow the instructions for claiming a refund in Chapter 8 of IRS Publication 519. Both Form 843 and Publication 519 can be printed from the US Treasury’s Forms and Publications site. Note that you must additionally attach IRS Form 8316, a statement from your employer (if possible), and a copy of your W-2, visa, INS Form I-94, INS Form I-538 (if you have one), and a statement saying “tax was withheld by mistake and my employer denied me a refund.” This information is sent in its own envelope (separate from your tax return) to Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, U.S.A.

Totalization Agreements

If you are in the United States only temporarily for work or study and are not exempt from social security under one of the above provisions, your US social security contributions may provide benefits in your home country under a “totalization agreement” that the US has negotiated with several other countries. For more information on totalization agreements and the countries participating go to the Social Security Administration’s Office of International Programs site.

How To Get Your Employer To Withhold The Proper Amount

If you have checked your country’s treaty with the US and have found you qualify for a treaty exemption on your wage or scholarship income, you must file IRS Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the payor of the exempt income.

You must include with Form 8233 a statement detailing your eligibility for the specific tax treaty exemption. You will find sample statements for each treaty country in IRS Publication 519, Appendix A (for students) and Appendix B (for teachers and researchers). Form 8233 and Publication 519 can be downloaded from the US Treasury’s Forms and Publications site, or you can call 1-800-TAX-FORM (1-800-829-3676) and ask for them to be mailed to you.

Have a question? Contact Gary Carter.

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Gary Carter, President of GW Carter, Ltd., was a tax professor at the University of Minnesota’s Carlson School of Management and the Associate Director of the Carlson School’s Master of Business Taxation Program until June, 2010. He received a B.A. in accounting from Eastern Washington University in 1977, a Master of Taxation degree from the University of Denver in 1980, and a Ph.D. in taxation from the University of Texas at Austin in 1985. Early in his career he worked as a revenue agent for the State of Alaska, and later in public accounting for both a regional CPA firm and a Big Four Firm. His current practice was started in 1999. He has conducted tax seminars on various tax topics and has published several books on taxation.

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One thought on “Social Security Tax And Employer Withholding: Resident And Non-Resident Aliens

  1. Avatar Alex says:

    Interesting stuff to read. Keep it up.

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