Hi,
I am student on my OPT currently working with a firm in California. My employer did not deduct CA state tax and Fed tax. And when I contacted my employer the lady who works there said that I requested exemption for those tax deductions in the beginning of employment. The fact is I requested exemption for Medicare and SSN taxes. Now what should I do?

When did you enter the U.S. on F1 visa? What is your citizenship?
Normally, during OPT you are exempt form FICA taxes. Employer is required to withhold federal income tax and state income tax.

May be your employer is treating you as an independent contractor. In that case, you will report your income on schedule C and also deduct job related expenses on schedule C.
Did you get W2 or 1099-MISC from your employer?

Thanks MukatA,
Here are the details you asked me...
I came in Dec04. I am on Non-Immigrant status. I recently gradauted. I did get in touch with my employer and the lady who works there did not have any knowledge and refused to direct me to the accounting department. I received a W2 form. I worked in my school and they just sent me only 1098, I did my internship in a comp any and they gave me a W2 (Which is correct). However when the new employer asked me to fill a W4 at the time of joining, I did not had any idea on what numbers to fill in for exemption. I asked the same lady on what numbers should I write and she was not sure. In my pay stubs from the new employer.. for CAS and USS (State & Fed taxes) the deductions were zero and the exemption code was 99.

I was not even sure about what CAS and USS meant in the pay stubs till yesterday. Nor did my employer educated me on that till I asked them. Can you please help me.

You are obligated to pay both federal and California income taxes on the income earned while on OPT. You are exempt from the FICA taxes.

Since no money was withheld, you will end up paying when you file your tax return (Form 1040NR or 1040NR-EZ). However, if you paid very little income tax on your 2006 return, there will be NO under-withholding penalty for the taxes owed for 2007.