I came to the US in sept 2002 as a phd student. I filed a 1040nrez the first five years, and then for 2007, I filed a 1040ez (since I had been a student for 5 years, and was now treated as a resident). My first question is, whether this was the right thing to do or not.

Second, I just started working on OPT, and was only charged federal and state tax. No medicare/social security tax (fica) was deducted. Is this correct? Shouldn't the employer deduct this since I am now a resident for tax purpose? How do I fix this? Should I even bother? Will I have to pay a lump-sum amount at the end of the year for the fica tax?

Ankzap:

Based on the information you have provided, you filed CORRECTLY in 2007 when you filed as a resident alien, filing Form 1040EZ.

As for the Social Security and Medicare taxes, you need to inform your employer that you are a resident alien for tax purposes and therefore liable for these taxes for 2007 and 2008. That is your obligation under the law.

I suspect that they will withhold these taxes retroactive to your initial hiring date. You can work out a payment plan with your employer to keep it from being too burdensome.