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Neda

H1B FICO taxes

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Hi, my COS from F1 to H1 was approved in Oct'2011.But in last December when my employer was checking the records, he realized that my payroll was running under F1 status and said didn't paid FICO taxes for 2012. He told me that when you file your tax returns at that time you can pay those taxes. But when I said the same to that tax consultant guy, he told me that's not a problem because you are started paying after that. Is he correct??

What are FICO taxes?? I am paying Fed and State taxes, do I need to pay FICO taxes also??

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FICO is medicare taxes, social security taxes, etc.

On H1, they need to be paid, usually deducted from your paycheck. If they weren't deducted, you still need to pay them.

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Because you are on H1b from Oct, 2011, you are responsible for Federal and State taxes from the first day of your H1b i.e. Oct 1st, 2011. By not paying the taxes you are putting yourself in trouble.

You should have asked you employer in Nov 2011 itself when you didn’t see withhold taxes on you paycheck. Remember, ignorance is not an excuse.

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You mean FICA not FICO. Google the term.

You and also your employer, both need to pay FICA from the date your status changed to H1 from F1.

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FICO is medicare taxes, social security taxes, etc.

On H1, they need to be paid, usually deducted from your paycheck. If they weren't deducted, you still need to pay them.

But an H1 employee is non-resident, so does he/she needs to pay those taxes. I mean we use the services of state and fed so we are paying fed and state taxes. But what about FICA?

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Because you are on H1b from Oct, 2011, you are responsible for Federal and State taxes from the first day of your H1b i.e. Oct 1st, 2011. By not paying the taxes you are putting yourself in trouble.

You should have asked you employer in Nov 2011 itself when you didn’t see withhold taxes on you paycheck. Remember, ignorance is not an excuse.

But I heard that lot of corporations doesn't pay fed taxes???

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But I heard that lot of corporations doesn't pay fed taxes???

And that matters how for an H1???

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Neda, If you didn't pay FICA taxes in the past, forget it. Why would social security administration be after you, when you are on H1 status?

Same happened to Geithner, nobody cared.

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Neda, If you didn't pay FICA taxes in the past, forget it. Why would social security administration be after you, when you are on H1 status?

Same happened to Geithner, nobody cared.

Geithner's case is different, he is citizen. Moreover, he works for Fed.

I am waiting for senior member's reply for rahul412's post.Does anyone has answer for his questions??

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Neda, If you didn't pay FICA taxes in the past, forget it. Why would social security administration be after you, when you are on H1 status?

They will be after him/her.

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But an H1 employee is non-resident, so does he/she needs to pay those taxes. I mean we use the services of state and fed so we are paying fed and state taxes. But what about FICA?

Huh? I suggest you go and download IRS Publication 519, Tax Guide for Aliens. Please read it, in particular the "Significant Presence Test."

Tax residency has nothing to do with Permanent Residency.

People on H1 are generally tax residents, and have to pay all the same taxes as everybody else, including FICA taxes. Period.

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Huh? I suggest you go and download IRS Publication 519, Tax Guide for Aliens. Please read it, in particular the "Significant Presence Test."

Tax residency has nothing to do with Permanent Residency.

People on H1 are generally tax residents, and have to pay all the same taxes as everybody else, including FICA taxes. Period.

Thank for the info.

what about the corporate? Is it fine if they don't?

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Thank for the info.

what about the corporate? Is it fine if they don't?

We are talking about the employee here.

Companies have their own tax obligations. See a CPA to get all the details of company tax obligations. Much more complicated than for individuals.

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Companies have their own tax obligations. See a CPA to get all the details of company tax obligations.

I got it. Thanks for the info Joe.

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Huh? I suggest you go and download IRS Publication 519, Tax Guide for Aliens. Please read it, in particular the "Significant Presence Test."

Tax residency has nothing to do with Permanent Residency.

People on H1 are generally tax residents, and have to pay all the same taxes as everybody else, including FICA taxes. Period.

JoeF, I did a little research on FICA taxes and what I understand is "Social Security is federal government program that provides retirement benefits to most Americans" and also states that "You can get only a monthly payment whose amount is determined by how long you've paid Social Security tax". That means this is kind of retirement plan??

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JoeF, I did a little research on FICA taxes and what I understand is "Social Security is federal government program that provides retirement benefits to most Americans" and also states that "You can get only a monthly payment whose amount is determined by how long you've paid Social Security tax". That means this is kind of retirement plan??

Yes, social security is a retirement plan.

Once a person has paid social security taxes for 10 years, that person is eligible for social security benefits at retirement. The benefits can even be paid abroad (there are some limitations.)

www.ssa.gov

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Yes, social security is a retirement plan.

Once a person has paid social security taxes for 10 years, that person is eligible for social security benefits at retirement. The benefits can even be paid abroad (there are some limitations.)

www.ssa.gov

=> I would disagree here. Social security is not an example of retirement plan. Retirement plan is something you save/ contribute today and after retirement you get that money back, you have the power to grow the money as you wish meanwhile. 401k is the example of retirement plan.

In Social Security, what you pay goes to people who are getting paid by social security currently. If you leave US after working 9 years, you would get nothing after retirement, and you may lose 100sk in social security. And finally, you don't have any right to know the equations behind the growth of the money and final amount you would get per month. It’s the government who will decide the per month amount for you. Even if you worked more than 10 year, that doesn't guarantee that you would get the money back. Search for "Social Security bankrupt". Correct me if I am wrong.

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=> I would disagree here. Social security is not an example of retirement plan. Retirement plan is something you save/ contribute today and after retirement you get that money back, you have the power to grow the money as you wish meanwhile. 401k is the example of retirement plan.

In Social Security, what you pay goes to people who are getting paid by social security currently. If you leave US after working 9 years, you would get nothing after retirement, and you may lose 100sk in social security. And finally, you don't have any right to know the equations behind the growth of the money and final amount you would get per month. It’s the government who will decide the per month amount for you. Even if you worked more than 10 year, that doesn't guarantee that you would get the money back. Search for "Social Security bankrupt". Correct me if I am wrong.

Good Info.

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Yes, social security is a retirement plan.

Once a person has paid social security taxes for 10 years, that person is eligible for social security benefits at retirement. The benefits can even be paid abroad (there are some limitations.)

www.ssa.gov

I am on H1 and not sure for how many years I will be in US.

Can I claim that money if I decided to leave US forever since I won't retire in US?

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In Social Security, what you pay goes to people who are getting paid by social security currently. If you leave US after working 9 years, you would get nothing after retirement, and you may lose 100sk in social security.

So indirectly it states that if you want that money then spend your rest of life in US??

And finally, you don't have any right to know the equations behind the growth of the money and final amount you would get per month. It’s the government who will decide the per month amount for you. Even if you worked more than 10 year, that doesn't guarantee that you would get the money back. Search for "Social Security bankrupt". Correct me if I am wrong.

In case if we won't get that money back then why should one pay those taxes??

Person is neither getting any benefits nor services from the govt.

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=> I would disagree here. Social security is not an example of retirement plan. Retirement plan is something you save/ contribute today and after retirement you get that money back, you have the power to grow the money as you wish meanwhile. 401k is the example of retirement plan.

In Social Security, what you pay goes to people who are getting paid by social security currently. If you leave US after working 9 years, you would get nothing after retirement, and you may lose 100sk in social security. And finally, you don't have any right to know the equations behind the growth of the money and final amount you would get per month. It’s the government who will decide the per month amount for you. Even if you worked more than 10 year, that doesn't guarantee that you would get the money back. Search for "Social Security bankrupt". Correct me if I am wrong.

Social security is still a retirement plan, a government-mandated one.

401(k) is a private retirement plan.

And while lots of people have claimed over the 70+ years that social security has existed in this country that it would go bankrupt, it still hasn't, and it is unlikely to do.

Most other countries in the Western World have similar plans, and none of them has gone bankrupt.

Since it is government-mandated and government controlled, you obviously have limited influence on it. But doomsday scenarios are overblown ;)

In fact, if we get a CIR, the contributions to social security would go up, making doomsday scenarios even less likely.

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In the Social Security system, the money you pay into the system gets immediately paid back out to the people who are currently getting Social Security checks. This arrangement came into being because of the way the system started. In 1935, when Roosevelt signed the Social Security Act into law, there were a lot of people who needed benefits (because of the Great Depression), but there was no money to pay those benefits with. The idea at the time was that people currently working would pay into the system, and their money would immediately go back out in the form of benefit checks. Each generation of retiring workers would get paid by the people currently working, and therefore the system would fund itself forever despite the fact that the system had no money to start with.

1.In the future, the retirement of millions will hurt the inflow-outflow ratio -- there will be so many retired people that the working people will not be able to support them. If the population had grown steadily this would not have been a problem, but there is no good way for the design of the Social Security System to handle a population spike like the baby boomers.

2.A retiree's Social Security benefit is calculated using a complex formula rather than an account balance, because there is no "account" in the traditional sense. Remember, if you can't hold it then you don't own it.

The point is the way SS and a Ponzi are both financed. In both cases, early participants receive payments, not from interest on their own investments, but directly from inflows from later participants...meaning if you don't get enough participants in the future (like having more people retiring than there are people working, for example) the system would collapse. Another difference is in ponzi scheme you don't force the investor to investment their money, but in this program govt is forcing the investors(employee and employer) to invest their earnings.

Now coming to SS, the Social Security system had a negative cash-flow of $47.8 billion last year (Google trust fund data, and report is dated on Jan 9th), after running a $48 billion deficit the year before. You may notice that(in that report) 70% of this deficit was created by the SSDI program, the U.S. government had to borrow $47.8 billion to fund SS last year.

When the US govt needs money,it takes out a loan from the Federal reserve. The Fed reserve prints(The US government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost-Bernanke on Nov 21st, 2002) the currency required for the loan, and in return receives an I.O.U from U.S Treasury(part of US govt)these I.O.U's are called as Govt bonds.With the money received from these loans,or bonds the US govt pays its bills. Meanwhile the US Treasury and Fed reserve sell these bonds at auction, where foreign central banks, individuals buy these US govt loans( China has brought more that one trillion worth of these bonds) .Now that the money received from these loans is spent on paying off the bills, how does the govt get the money to pay back the current loan and interest charged on it? ( this slightly resembles ponzi scheme) And that $47.8 billion borrowed to fund SS last year where brought buy selling these govt bonds.

It is true that Social Security system currently takes in more money than it pays out in order to try to handle the baby boomer problem. But what happens with the excess money the system collects? The Social Security system buys U.S. Treasury bonds with the surplus. Essentially, the government (in the form of the Social Security Administration) loans the surplus to itself.In future decades, when it comes time to start drawing on the collected surplus, the government will pay itself back through tax revenue (or additional borrowing). The Social Security system will start cashing in the bonds, and the government will have to make good on them with tax revenue.

On Jan 14th 2013, Geithner wrote a letter to House speaker Boehner ( Google Geithner's letter to House speaker Boehner) , he said " If Congress does not act to extend borrowing authority, all of these payments would be at risk. This would impose severe economic hardship on millions of individuals and businesses across the country."

So, according to Geithner’s own words, Social Security payments are not derived from savings. No, they have to be borrowed just like any other expense.

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In case if we won't get that money back then why should one pay those taxes??

Person is neither getting any benefits nor services from the govt.

You need to learn how social security works.

It is not like a bank. The money you pay in is used to pay current retirees.

Further, a number of countries have similar social security systems and there are agreements with these countries, which take the time paid into the US system in account when calculating retirement benefits there.

If you don't like this system, don't come here on H1. It is THAT simple. If you refuse to pay these taxes, you can not be on H1.

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You need to learn how social security works.

It is not like a bank. The money you pay in is used to pay current retirees.

Further, a number of countries have similar social security systems and there are agreements with these countries, which take the time paid into the US system in account when calculating retirement benefits there.

If you don't like this system, don't come here on H1. It is THAT simple. If you refuse to pay these taxes, you can not be on H1.

So you have to pay the money even though you don't get the services??

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