Hi all,
I came to US on F-1 status in Aug 1998. I joined my current company on OPT in May 2000. I got my H1B status in July 2001. Till date (Dec 2006), my employer has not withheld the FICA taxes. I was not very well-informed on this and realised it is better to fix the situation. My questions are
1. Who pays the FICA taxes for these 6 years legally? Employer or me?
2. How many years should we back pay? Is three years the right number? If so, what happens to the first three years? Will IRS or employer issue me a letter five years down the line to pay for the first three years?
3. Will this end up in a legal battle between me and employer? I really don't want to leave this company.

Please advise.

Thanks and Happy Holidays!

Jay:

1) You are not responsible for the payment of these taxes. It is SOLELY the responsibility of the employer to pay the taxes and collect the employee's share from the employee.

2) Actually, if the IRS finds out about this oversight, they will probably require the employer to pay ALL six years. However, the employer, by law, can only require YOU to pay for 2006, and then only if they act prior to 31 January 2007. I recently called the IRS about a very similar case and they confirmed that the employer can only collect at most one year's back taxes for Social Security and Medicare. It is spelled out in IRS Pub 15.

3) There will be no legal battle; the employer would have no chance in court. Now, they MAY fire you if you refuse to pay. You have to decide if your job is worth paying SIX years of back taxes. The bill could exceed $50,000.

Jay:

1) You are not responsible for the payment of these taxes. It is SOLELY the responsibility of the employer to pay the taxes and collect the employee's share from the employee.

2) Actually, if the IRS finds out about this oversight, they will probably require the employer to pay ALL six years. However, the employer, by law, can only require YOU to pay for 2006, and then only if they act prior to 31 January 2007. I recently called the IRS about a very similar case and they confirmed that the employer can only collect at most one year's back taxes for Social Security and Medicare. It is spelled out in IRS Pub 15.

3) There will be no legal battle; the employer would have no chance in court. Now, they MAY fire you if you refuse to pay. You have to decide if your job is worth paying SIX years of back taxes. The bill could exceed $50,000.

Little confused. If IRS asks the employer to pay for six years then can the employer still ask me my share of 6 years with the pressure of firing me? I am still OK with paying my share for 2006 but not the whole deal.

Thanks for the advise. Please reply to this one.

Jay:

1) You are not responsible for the payment of these taxes. It is SOLELY the responsibility of the employer to pay the taxes and collect the employee's share from the employee.

2) Actually, if the IRS finds out about this oversight, they will probably require the employer to pay ALL six years. However, the employer, by law, can only require YOU to pay for 2006, and then only if they act prior to 31 January 2007. I recently called the IRS about a very similar case and they confirmed that the employer can only collect at most one year's back taxes for Social Security and Medicare. It is spelled out in IRS Pub 15.

3) There will be no legal battle; the employer would have no chance in court. Now, they MAY fire you if you refuse to pay. You have to decide if your job is worth paying SIX years of back taxes. The bill could exceed $50,000.

One more thing. I am looking at http://www.irs.gov/pub/irs-pdf/p15.pdf
Can you please tell me exactly where it mentions that employer can collect at more one year in back taxes?

Thanks again.

It's on page 28 of the IRS Pub 15, under "Collecting underwithheld taxes from employees. Note the second last sentence.

It's on page 28 of the IRS Pub 15, under "Collecting underwithheld taxes from employees. Note the second last sentence.

Thanks a lot for replying. The second last line of IRS Pub 15 says "Underwithheld INCOME tax must be recovered from the employee on or before the last day of the calendar year."

Is it safe to assume that the above also holds true for Underwithheld FICA tax?

Please reply and thanks for your time.

Jay

That is a safe assumption.

It IS in the IRS Pub 15, however, as I called the IRS and spoke with a representative who read the pertinent passage from IRS Pub 15 about six weeks ago.

I just cannot find that passage.

Jay23, please contact me - PM or better yet e-mail - very similar situation!!

No comment!

Jay:

1) You are not responsible for the payment of these taxes. It is SOLELY the responsibility of the employer to pay the taxes and collect the employee's share from the employee.

2) Actually, if the IRS finds out about this oversight, they will probably require the employer to pay ALL six years. However, the employer, by law, can only require YOU to pay for 2006, and then only if they act prior to 31 January 2007. I recently called the IRS about a very similar case and they confirmed that the employer can only collect at most one year's back taxes for Social Security and Medicare. It is spelled out in IRS Pub 15.

3) There will be no legal battle; the employer would have no chance in court. Now, they MAY fire you if you refuse to pay. You have to decide if your job is worth paying SIX years of back taxes. The bill could exceed $50,000.

AtlantaTaxExpert:

I found your comments above very helpful since I am in a similar situation to Jay's. I started at my current employer in the summer of '06 on a F-1 visa (OPT). I became a permanent resident the summer of 2007. I am about to resign from this job and a week or two ago the employer noticed that they did not withhold FICA taxes from my paychecks since I became a permanent resident.

I have two questions:

1. I interpreted the relevant language in IRS Pub 15 to mean that the employer is able to ask and charge the employee for his/her portion of the FICA taxes due but that the ee is not legally obligated to pay it since it is ultimately the employer's responsibility to ensure those taxes are withheld from each paycheck and since "reimbursement is a matter for settlement" between the er and the ee. Do you agree?

2. In my case, I believe that the employer could only recover FICA taxes for the pay I received during 2008 and not 2007 since they did not charge me by 12/31/07 ("last day of the calendar year") for the 2007 FICA taxes due. Do you agree?

Your expedient answers would be much appreciated.

Best regards,
Q_A

Did you receive W2 for 1099-Misc for 2007 from your employer? Read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor. (http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html)

If you were a regular employee, then employer must deduct FICA taxes when you are resident. For 2007, did you inform the employer of the change of status? If you did not inform the employer, then evidently, you are responsible for this situation.

For 2008, they must recover all the due FICA taxes from you.

Did you receive W2 for 1099-Misc for 2007 from your employer? Read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor. (http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html)

If you were a regular employee, then employer must deduct FICA taxes when you are resident. For 2007, did you inform the employer of the change of status? If you did not inform the employer, then evidently, you are responsible for this situation.

For 2008, they must recover all the due FICA taxes from you.

MukatA:

I did receive a W-2 from my employer (I am a regular full-time employee at a corporation).

I did inform the employer of my change of status. More than once actually. It seems they did not coordinate well with payroll.

I would have given a notice to the employee if I was aware of the tax situation but I wasn't. Nevertheless, what is your opinion on my 2 questions?

Thanks.

Q_A:

The employer CAN collect unwithheld FICA taxes for calendar year 2008, but it is TOO LATE for them to legally require you to pay these unwithheld taxes for 2007.

Just got a letter from Corp that I am to make FICA Taxes repayment as from 2005 to 2009. Are they allow as per the Tax Pub 15 to ask me to repay from 2005 until now or just ask for 2009 only? Also since it was the Corps fault are they allowed to charge an interest rate forwards the repayment?

It is my considered opinion that the corporation has NO LEGAL STANDING to collect past FICA taxes for 2005 through 2009. Since they have no legal standing to collect the money, for sure they cannot charge you interest.

The only thing they can do is terminate your employment if you fail to coorperate.

Now, five years worth of FICA taxes represents a SIGNIFICANT amount of money, so it may be worth quitting over this issue. If you leave their employment, they would, in my opinion, have NO CASE under which they can take you to court on this issue.

However, since I am NOT an attorney, recommend that you take this to a local tax attorney and get a professional LEGAL opinion in writing before you proceed.