I'm a resident alien for tax purposes. My wife was on F-1 till June 2006, then OPT till Nov 2006, and H-1 afterwards. We elected to treat her as a resident for tax purposes when filing returns for 2004 and 2005.

My question is :
Her employer did not withhold FICA taxes until she received her H-1B approval in Nov 2006, presumably because she was F-1 OPT.
But since we file joint returns, I'm guessing that FICA taxes should've been withheld even when she was in F-1 OPT status. How do we go about correcting this ? Is this the employer's responsibility, and will we owe any penalties for underpayment as a result?

Any advice is greatly appreciated.

Thank you for your time,

thound

It is the employer's responsibility. As long as your wife did not actively try to conceal her true status, she will not be held responsible.

I believe that since you made the election to file as a resident, you probably needed to notify your employer that your wife was no longer a non-resident alien for tax purposes.

I agree with TaxSearcher that you did have that obligation to properly notify the employer that your wife was filing as a resident alien.

However, it has been my experience in these matters that many employers do NOT see the implications of such a notification, and continue to fail to withhold the taxes.

In any event, the IRS will not try to collect these taxes from your wife. They will go the employer for these taxes. Her employer may then try to collect these back taxes taxes from her.

It is my understanding of current tax law that they have NO legal standing for such a collection. Several phone calls with the IRS has confirmed this.

Of course, they may then fire her if she resists the collection attempt, but that is another issue.

Thank you both for your advice.
The problem is employers usually assume your filing status based on visa status. After the first paycheck, we did notify her employer that she had elected to be a resident so we could file jointly. It turns out FICA taxes were deducted for all "paychecks" after the start date, except the first relocation/bonus paycheck.
At this point, HR/payroll has been informed, but I'm not sure they've understood the issue so it's still unclear what's going to happen.

Should I wait to see if they'll send out a W-2c, before I file my return ? I don't think this affects my income tax liability in any way, but I wanted to check if there was any reason to wait.

Thanks again for your help.


I agree with TaxSearcher that you did have that obligation to properly notify the employer that your wife was filing as a resident alien.

However, it has been my experience in these matters that many employers do NOT see the implications of such a notification, and continue to fail to withhold the taxes.

In any event, the IRS will not try to collect these taxes from your wife. They will go the employer for these taxes. Her employer may then try to collect these back taxes taxes from her.

It is my understanding of current tax law that they have NO legal standing for such a collection. Several phone calls with the IRS has confirmed this.

Of course, they may then fire her if she resists the collection attempt, but that is another issue.

If you notified them that your wife opted to be treated as a resident alien and they STILL failed to withhold the FICA taxes, then you are both LEGALLY and MORALLY "off the hook" In my opinion.

I agree with ATE. Your obligation was to inform the employer (since you were making an election). As long as you did that, you should be in the clear.

WOW! TaxSearcher and I AGREE! A momentous event! :-)