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Abhishek Roy

FICA tax liability while transitioning from F1 to H1B

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My employer has a policy of withholding maximum taxes for all employees and so they deduct FICA from each pay-slip although I was on F1 status during Jan-Oct 2018. I was picked in the lottery and H1B status started on Oct 1st, 2018.

I know that on H1B I am liable to pay FICA and on F1 status I don't have to pay FICA.

My question is can I claim refund from IRS for the 9months that I was on F1 status. As per the IRS link under limitations of exemption it says I would be liable to pay FICA, but I am not sure if its for the entire tax year or just the three months.
https://www.irs.gov/individuals/international-taxpayers/foreign-student-liability-for-social-security-and-medicare-taxes

Any advice is highly appreciated, the CPAs have mixed opinions.

Note:

1. My F1 status started in Aug, 2015 (less than 5 years in the US)

2. My OPT started on Feb, 2017

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Best way to ask your employer to refund it. That's the easiest way. 

Same thing happened to me and my Friend same company. I asked IRS and he asked company. 

He got it and i didn't. It's been 7 years. This was personal experience.   

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Based on what you described, you shouldn't have been subject to FICA taxes during your time on F1 status in 2018. You were subject to FICA taxes during your time on H1b status, so there is nothing wrong with FICA being withheld during that period of time.

The first thing you need to do is to ask your company for a refund of the FICA withheld during your time on F1, showing them the document that says nonresident aliens on F1 status are not subject to FICA.

If your company refuses, you can ask IRS for a refund, by filing Forms 843 and 8316 (note: this is separate from your annual income tax filing). See https://www.irs.gov/individuals/international-taxpayers/social-security-tax-medicare-tax-and-self-employment However, anecdotal reports say that many people have waited for years and the IRS is still processing it and have still not issued the refund.

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**Looks like this is a Tax related question not H1B or F1 related question, this may not be a proper place to get a tax advice. **

OPT is under F1 as well.

Consult a qualified tax professional. 

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@Leavemessageh1b This forum lists as H1B: General, I have a question related to tax true but its pertaining to status change from F1 to H1B, I don't see why this is not a good forum for this question.
If you read my post carefully I did mention I have consulted CPAs (Let me add I have consulted 6 CPAs) what is important is to understand that most of these so called "tax professionals" don't always have a full understanding of the law, A lot of Indians and Chinese nationals setup a temporary office and file taxes without fully understanding all the laws. The fact that IRS send us money doesn't mean its all good, A lot of folks get audited and pay penalties when their CPAs make mistakes.
@newacct If you read the link, IRS says that tax category is not for months under OPT / months under H1B. The tax bracket is applicable for the whole year. My interpretation is even if one is in H1B for three months they are to be treated as US persons for the whole year and have to pay FICA. I was hoping that a lawyer could clarify this. The verbiage on the IRS page is very important.
@adshah84 I filed my request for abatement and got my FICA refund for 2017 within 6 months. My employer does not collect it and refund, went down that path they don't care. My concern is the language used by IRS seems to be that tax liability is for the entire year not for months on a particular status. I wanted to see what the lawyers in this forum make of it. 

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While finance professionals on this forum respond to the tax queries.. the Indian and Chinese nationals mentioned above are in business because they have a market. Remember the adage.. you get what you pay for. If an Indian H1b/F1 ends up going to these so-called temp office tax preparers who charge a fraction of what H&R block does, they shouldn't expect much professionalism to begin with. Folks in this strata want every service done on the cheap. 

Back to the topic! 

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13 hours ago, Abhishek Roy said:


@newacct If you read the link, IRS says that tax category is not for months under OPT / months under H1B. The tax bracket is applicable for the whole year. My interpretation is even if one is in H1B for three months they are to be treated as US persons for the whole year and have to pay FICA. I was hoping that a lawyer could clarify this. The verbiage on the IRS page is very important.

This has nothing to do with brackets. You were a nonresident alien for all of 2018, because you didn't pass the Substantial Presence Test for 2018 (you were an "exempt individual" (days of presence exempt from the SPT) during your days in F1 status in 2018, because you have not been an exempt individual for some part of 5 previous calendar years; your days in H1b status are counted in the SPT, but they are not enough to pass the SPT for 2018).

According to this, nonresident aliens in F1 status are exempt from FICA taxes when working on campus or on practical training. Nonresident aliens in H1b status are not exempt from FICA taxes.

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@Provence What if I told you last year I went to H&R block and their IBM Watson based tax preparation software picked the wrong forms for doing my taxes, they later told me they weren't specialized in handling tax needs for internationals.
@newacct I agree with you completely however, please read this link: 
https://www.irs.gov/individuals/international-taxpayers/foreign-student-liability-for-social-security-and-medicare-taxes

As per this link sections Limitations on exemption:
The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status.
@gopalakrishnach I agree its not directly an immigration question, its a tax question arising due to change of immigration status. I have consulted with numerous CPAs and nobody seems to understand this well enough. I wanted to take a chance with lawyers on this page. The forum title reads: H1B general, I interpret that to be any questions pertaining to H1B. 

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On 3/18/2019 at 7:08 PM, Abhishek Roy said:


@newacct I agree with you completely however, please read this link: 
https://www.irs.gov/individuals/international-taxpayers/foreign-student-liability-for-social-security-and-medicare-taxes

As per this link sections Limitations on exemption:
The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status.

Once you changed status, you were no longer exempt from FICA, but you were still exempt from FICA for the period of time before the Change of Status happened.

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