What is FICA Tax and Do I Have To Pay It?
What is FICA tax?
The Federal Insurance Contributions Act (FICA) is the means by which Social Security and Medicare are funded in the US.
FICA also provides benefits to retirees, children who have lost their working parents, widows and widowers, and disabled workers who qualify for benefits.
For self-employed people, there is an equivalent law called SECA (Self-employed Contributions Act).
Contributions to FICA are deducted from each employee paycheck. Many workers in the US will notice FICA being deducted from their income each time they receive their paycheck.
But do nonresidents have to pay FICA? And what should you do when FICA was deducted from your pay when it shouldn’t have been?
In this guide, we will cover everything a nonresident in the US needs to know about FICA.
Do nonresidents have to pay FICA?
If you are a nonresident in the US you may be exempt from FICA.
International students, scholars, teachers, professors, researchers, trainees, physicians, au pairs, summer camp workers, and other non-students on F-1, J-1, M-1, Q-1 or Q-2 visas are entitled to a FICA exemption. The exemption period covers your first five calendar years of physical presence in the US if you are a full-time student at a US educational institution. You are exempt for your first two years if you are not a full-time student.
The five-year exemption permitted to F-1, J-1, M-1 full-time students also applies to any period in which the international student is in ‘practical training’ allowed by the United States Citizenship and Immigration Services USCIS, as long as the foreign student is still classified as a nonresident alien for tax purposes.
Generally, a nonresident alien temporarily admitted in the United States as a student is not permitted to work for a wage or salary or to engage in business while in the United States. However, if a student is granted permission to work, Social Security and Medicare taxes are not withheld from their pay. This exclusion ONLY applies to the student, not their spouse or dependents under accompaniment statuses.
However, if they remain students (primarily) they may be able to claim the Student Social Security and Medicare exemption. If Social Security or Medicare taxes are withheld from pay that is not subject to these taxes, contact the employer who withheld the taxes in error for a refund. The employer would also be eligible for a refund of their portion of the erroneously withheld taxes. If that employer does not refund the withheld taxes, file Form 843, Claim for Refund and Request for Abatement and attach supporting documentation for reimbursement.
FICA taxes also do not apply to payments received by students employed by a school, college, or university where the nonresident student is pursuing a course of study.
Who may be exempt from FICA?
Yes. Nonresidents will not have to pay FICA if they are earning income from any of the below employment types:
On-campus student employment up to 20 hours a week (40 hrs during summer vacations)
Off-campus student employment allowed by USCIS
Practical Training student employment on or off-campus
Employment as professor, teacher or researcher (within 2-years exemption period)
Employment as a physician, au pair, or summer camp worker (within 2-years exemption period)
When do nonresidents have to pay FICA?
FICA exemption does not apply to:
Spouses and children in F-2, J-2, M-2, or Q-3 nonimmigrant status
Nonresidents in employment which is not allowed by USCIS or in employment which is not closely connected to the purpose for which the visa was issued
Nonresidents in the US on F-1, J-1, M-1, or Q-1/Q-2 visas who change to an immigration status which is not exempt or to a special protected status
Nonresidents in the US on F-1, J-1, M-1, or Q-1/Q-2 visas who become resident aliens
If the exempt period has passed – 2 years for J and Q visas and 5 years for F and M students
The employment should be closely connected to the purpose for which the visa was granted
FICA and residency status
Resident aliens for tax purposes have the same liability for Social Security/Medicare Taxes that US Citizens have.
You are considered a resident alien of the US for tax purposes if you meet either the Green Card Test or the Substantial Presence Test (SPT) for the calendar year.
Green Card Test
If you have a Green Card, you are considered a resident alien for tax purposes.
Substantial Presence Test (SPT)
You will be considered a resident alien for tax purposes if you have been present in the US for at least 31 days in the current year, and present in the US for 183 days over the three year period that includes the current year and the prior 2 years. The 183 days is calculated as follows:
• Count all the days present in the US in the current year, plus 1/3 of the days present in the US in the first preceding year, plus
• 1/6 of the days present in the US in the second preceding year. If the total is 183 days or more, you have met the SPT and are considered a resident alien.
Please be advised that, generally, nonresident alien students and scholars admitted in the US with an F or J visa may be exempt from this test.