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

Yes, you do.

pk123

Hi,

Thanks for your answer. I have a residence at France and working in an International organization. Some of my friend do not pay any tax even of they have job in USA and on H1B. I do not know how is it possible.

Thanks

MukatA

If you have H1-B visa and are in the U.S. and have income, it is subject to the U.S. taxes.

If you have H1-b visa and you live outside the U.S., then you are foreign alien for the U.S.-- you are neither resident of the U.S. nor are non-resident. You are foreign person. Ask you company not to hold any taxes on your income.

AtlantaTaxExpert

Sorry, this time MukatA's interpretation is not correct.

Due to your H-1B visa status, the U.S. government considers you to be a resident alien and therefore subject to U.S. taxes, regardless of your physical location.

The only time that would NOT apply would be if the USCIS did not ALLOW you to return to the U.S. In that case, the refusal to allow your return would have the effect of revoking your H-1B visa status.

This past tax season, I submitted an amended return for a client in Pakistan for his 2006 tax return on that basis.

IntlTax

ATE, if PK123 doesn't meet the green card test or the substantial presence test, what would make him be treated as a resident for U.S. tax purposes?

AtlantaTaxExpert

I posed the same question to the IRS for the 2006 tax season, and they said the fact that the taxpayer was under a H-1B work visa made him the equivalent of a U.S. citizen working overseas.

Now, the H-1B visaholder could and probably should file Form 2555 to claim the Foreign Income Exclusion to gain relieve from federal income taxes and possibly state income taxes, depending on the state, but he/she still would be liable for the Social Security and Medicare taxes on the salary paid by the U.S.-based employer.

IntlTax

I believe the IRS was wrong. This is not unusual. They were probably thinking about someone with a green card, rather than someone with an H1-B visa. The individual above didn't meet the green card test or the substantial presence test. Thus, they should not be considered U.S. tax resident for that year.

AtlantaTaxExpert

Perhaps.

What say you about the FICA (Social Security and Medicare) taxes, which are withheld and paid by the employer?

IntlTax

No FICA taxes would be due for a nonresident alien that performs services outside the U.S., even if paid by a U.S. employer.