Actually I have two questions:

1) Reading a few other posts, I have noticed that a lot of people are talking about that while being on F1 and working under OPT, my employer is not supposed to withhold SS and Medicare. Is that correct or did I understand sth the wrong way. If, this is true, is there a way that I can claim a refund? And if so, what forms would I need to file?

2) I currently work in Arkansas, where we have to pay state taxes. I have lived here for some time now and I am not sure if I am considered to be an Arkansan resident. Do I, as a F1 holder have to file state taxes as well?

Thank you so much for your help!
Angelika

Angelika:

1) Yes, this is true. First, you need to ask your employer to refund the SS and Medicare taxes. If they refuse (and they probably will refuse), get the refusal in writing. You then need to file Form 843 with a variety of other documentation. Download IRS Pub 519 from www.irs.gov and read page 46 for the details.

2) If you earned income in Arkansas, then you probably need to pay Arkansas state income taxes.

My employer and I were not aware of the fact that SS and Medicare can't be withheld from my income. If I can't get a refund through my employer, what does he need to state in the refusal. Does he have to state a reason? Is there a chance that he might get into trouble for withholding SS?
Since we both were not aware that SS and Medicare cannot be withheld, how can we go from here (meaning my next paycheck?) Do I need to fill out a new W4? Or can he just stop withholding it? Is there anything he needs to do if he does not withhold it?

Also, is it correct that if I file the form 843, can I file the 1040NR-EZ or do I have to file 1040NR?

Thank you so much for your help! I really appreciate it!

Geli07:

This error is rather common, so I suspect your employer will not get into trouble. Of course, it is likely he will not get his share of the Social Security and Medicare taxes back, either, so that is punishment enough. If he has not already done so, he should refund the taxes withheld so far in 2006 and stop withholding. I do not know if there is any other requirements.

Reason for refusal: money has already been sent to the IRS and cannot be recovered.

The filing of the Form 843 is a separate event which is mailed in a separate envelope. It has no bearing on whether you can file Form 1040NR or 1040NR-EZ.

Geli07:


Reason for refusal: money has already been sent to the IRS and cannot be recovered.

The filing of the Form 843 is a separate event which is mailed in a separate envelope. It has no bearing on whether you can file Form 1040NR or 1040NR-EZ.

How about the following:
They can do adjustments into their FORM 941 for the quarter on line 7e.
They can provide refund to the Emploee and claim tax credit with IRS on their next quarter return.
They can Amend quarters even for previous years.
Why do not you try that scenario.
In most cases this work.

Atl.tax expert :What is your opinion about the scenario above?

Troj:

In most cases, the employer just does not want to bother doing this, since it would involve detailed recalculations by the firm's accountant. If he contracts such work out, the fee to amend 941s that far back could run in the 1000s of dollars. It's easier to say NO and let the employee request the refund.

According to a few posts, my understanding about 843 form is I can file this form first even I haven't filed other 1040 and 1040NR forms. Do I need any other documents besides a refusal letter from my employer?

See page 46, IRS Pub 519 for a list of the documents needed to file Form 843 for refund of Social Security and Medicare taxes.

Atlanta tax expert,

I have a query on this. I heard that if you claim social security and medicare, you should not be claiming standard deduction, you should itemize your deduction? Is that true?

Manisha:

Filing a claim for a refund of Social Security and Medicare on Form 843 really has nothing to do with claiming the standard deduction. It has to do with your visa status. In my opinion, you can file as a resident alien under the First Year Choice and still file Form 843.

Further, even if you file Form 1040NR, you may be allowed to claim the standard deduction if you are from India.