Hi,

I am on H1B visa and will be outside USA for more than full calender year. Do I have to pay
any tax Fed., state, including Social security medicare etc...?

Thanks,

Prafulla

AtlantaTaxExpert

I suspect that the IRS does NOT agree with your interpretation of the rules, and I would be willing to bet a client's fee that our poster's U.S. employer IS withholding the FICA taxes.

pk123

Hi ATE,

I do not agree with you on this. I talk to all of my friends who work here from USA do not pay any tax as they are out of USA. I do not know if there is any limit on the income.

AtlantaTaxExpert

PK:

I have not doubt that they do NOT pay the taxes, and in fact, using Foreign Income Exclusion, they can and should NOT pay taxes on income earned outside of the U.S.

However, if they are on H-1 or H-1B visas, the IRS considers them to be U.S. residents and are therefore considered to be liable for U.S. income taxes and, most importantly, Social Security and Medicare taxes.

pk123

Hi IntITAx,

I have asked my employer not to hold any tax but they still keep my fr=ederal tax and FICA tax, thought they returned my state tax completely and agree not to hold state tax.
Is there any tax booklet that I can show them, so that they won't hold any tax.

Thanks,

Prafulla

AtlantaTaxExpert

I cannot provide such a citation, because, as stated, it is my belief that you ARE liable for both income and FICA taxes while you are on H-1B status.

IntlTax

Your U.S. employer has an obligation to withhold if you are a resident of the U.S. The analysis to determine whether you are a resident of the U.S. is complex and may depend on your future actions (e.g., if you come to the U.S. for a certain number of days during the calendar year). If 1) you do not have a green card at any point during a calendar year, 2) you are present in the U.S. for less than 31 days during a calendar year, and 3) you are not married to a U.S. citizen or resident, then you should NOT be treated as a resident.

If the employer did not withhold, and was required to withhold, the employer can be held liable for the tax. Thus, they are being cautious and withholding. If you are not treated as a resident for the calendar year, then you can file a U.S. tax return at year end and obtain a refund for the U.S. taxes withheld.

pk123

Can I get FICA tax back as well? How? I heard it is difficult to get FICA tax once paid.

IntlTax

Yes, you should be able to get FICA back as well. See Form 843. You will need to explain that you were not a resident at all during the year and therefore no FICA tax is due.

AtlantaTaxExpert

What would be your IRC or IRS pub citation in the Form 843 submission requesting a refund of these FICA taxes?

IntlTax

I.R.C. 3121(b):

[T]he term "employment" means any service, of whatever nature, performed (A) by an employee . . . (i) within the United States, or (ii) . . . . or (B) outside the United States by . . . a citizen or resident of the United States . . .

The service is not being performed in the U.S. PK123 is not a U.S. citizen or a U.S. resident. Thus, the services being performed do not meet the definition of "employment." This means that the compensation he receives is not "wages" as defined in I.R.C. 3121(a). This means that the compensation is not subject to FICA tax under I.R.C. 3101(a).