Hello,

I am in the US from Jan 2007 (was on F1 visa) and graduated this Spring (May) 2009 and currently on OPT visa.
I will start to work for a small firm in N. California from July 2009 and want to know the tax cuts.
I am not sure if its going to help but I moved from Dallas, TX.
Lets assume that my total pay will be 35K annually.
1. What will be my total tax cut per month or per pay check (bimonthly salary)?
Federal and state tax - % ; SSN tax - % ; Medicare tax - %
2. I know there is some Indo-US treaty so will not have SSN and medicare tax but will it be cut initially from my salary and will be refunded when I file my taxes to USCIS?
3. For the SSN tax, is 50% share paid by my employer.
4. Regarding Medicare tax, what if I am not being offered 401K medical benefits from my employer? Does that mean no medicare tax cut?
5. What is my tax bracket for the salary mentioned?
6. I want to know how much salary I would get in hand per month after all these tax deductions before I start to work (assuming 35K annual salary).

I know it's a long question but really imp for me to know. I appreciate your patience.

Regards,
Strange

Strange:

1) While on OPT, you are liable for federal and California state income taxes while working in California. Once you moved to Texas, the California state income tax liability stops!

2) You are exempt from FICA (Social Security and Medicare) taxes while on OPT. You should contact your employer and request the refund these taxes. That process is both easier and faster than submitting Form 843 to the IRS to request the refund.

3) For every dollar you pay in FICA (Social Security and Medicare) taxes, your employer matches that dollar and pays the IRS on a monthly basis. That is why the employer should be willing to apply for the refund, because HE gets money back as well.

4) Neither 401K nor medical benefits has ANYTHING to do with the Medicare tax.

5 & 6) For a single person on a $35K salary, your marginal tax bracket is 15%, but you are right on the edge to cross over to the 35% tax bracket. How much you get after taxes depends on how many exemptions you claim on the Form W-4. The more exemptions claimed, the less income taxes are withheld.

BTW, an IRS regulation REQUIRES you claim SINGLE status with no more than ONE exemption on your W-4; this is done to ensure that enough money is withheld from yout salary to cover your tax liability.

Quote:

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Originally Posted by AtlantaTaxExpert

Strange:

1) While on OPT, you are liable for federal and California state income taxes while working in California. Once you moved to Texas, the California state income tax liability stops!

2) You are exempt from FICA (Social Security and Medicare) taxes while on OPT. You should contact your employer and request the refund these taxes. That process is both easier and faster than submitting Form 843 to the IRS to request the refund.

3) For every dollar you pay in FICA (Social Security and Medicare) taxes, your employer matches that dollar and pays the IRS on a monthly basis. That is why the employer should be willing to apply for the refund, because HE gets money back as well.

4) Neither 401K nor medical benefits has NAYTHING to do with the Medicare tax.

5 & 6) For a single person on a $35K salary, your marginal tax bracket is 15%, but you are right on the edge to cross over to the 35% tax bracket. How much you get after taxes depends on how many exemptions you claim on the Form W-4. The more exemptions claimed, the less income taxes are withheld.

BTW, an IRS regulation REQUIRES you claim SINGLE status with no more than ONE exemption on your W-4; this is done to ensure that enough money is withheld from yout salary to cover your tax liability.

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Thanks... indeed that helped... but some things are not very clear for me... :confused:
1. I am not moving to Dallas. I moved from Dallas (where I was on F1) to CA to work here (Now on OPT) and I am indeed single.
2. You mentioned that I am exempt from FICA tax... got it... but then it will still be deducted on a monthly basis from my paycheck but refunded later right?. or won't it be deducted at all... tats my question?
From the answers you gave, I suppose FICA tax gets deducted monthly but would be refunded later when I file my income tax every year.
3. You mentioned that I am on the verge of 15-35% tax bracket. At what salary would that thin out? 40K?

Thanks a lot AtlantaTaxExpert. Awaiting your response. :)

1. You will pay federal income tax, CA income tax and CA SDI.
2. Tell your employer not to deduct FICA taxes at all.
3. On your W4, claim 2 allowances. I did not follow what you mean by thin out?
4. For your federal tax return, you must file nonresident tax return Form 1040NR or 1040NR-EZ and Form 8843. Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

You are liable for California taxes ONLY FOR income earned within the California state borders.

Agree with Mukata; STOP the FICA withholding as soon as possible and ASK your employer to refund those taxes already withheld.

The FICA tax refund is a separate process (using Form 843)from the annual tax return, which is why you should avoid it if possible.

The 35% was a typo; it is actually 25%, and if your income is 40K, you ARE in the 25% tax bracket for the last $5,000 of your $40K.

Quote:

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Originally Posted by MukatA

1. You will pay federal income tax, CA income tax and CA SDI.
2. Tell your employer not to deduct FICA taxes at all.
3. On your W4, claim 2 allowances. I did not follow what you mean by thin out?
4. For your federal tax return, you must file nonresident tax return Form 1040NR or 1040NR-EZ and Form 8843. Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

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Hello,
Thank you for your inputs. I understood that I'll have to pay federal income tax, CA income tax and CA SDI (Dont know what this is exactly!). However my main concern is what total percentage does it come up to?
AtlantaTaxExpert had mentioned that for 35K salary (assumed), I am on the edge of crossing over into the 35% tax bracket but still within 15% for the 35K salary. By thin out I wanted to know for what salary would my tax bracket change from 15% to 35%?
Does this tax bracket mean I will lose 15% of my salary as income tax (inc all taxes)?
Thanks for the other info you have added.
Appreciate your patience.
--
Strange

Oh OK... I am sorry... I posted it just sec after the above post.
So now for 35K salary I'll have to pay 15% of it toward tax and say my salary increases to 50K, then I pay 15% up to 35K and 25% for the remaining 15K salary as tax right?
Thanks.
Strange

Yes, that is correct.

When I cited "marginal tax bracket", marginal means the tax rate you pay on the LAST dollar eanred in the calendar year.

Great information here. I am in the same position as Mr. Strange is. I started working in the state of CA and on CPT status and now I am eager to know what would be my total tax rate for an earning of $75,000 per annum (total = federal+state taxes+SDI/state disability insurance... only GOD and that tax policy maker in CA knows what benefit will this SDI bring to a non-resident worker in CA, US, I know it's a mandate withholding but what is it for is my question?? )

Could someone please let me know what will be my total tax rate for my earning as mentioned above, considering that I am on F-1 status/CPT work authorization). Any help is appreciated.

The SDI is used to fund the State Disability Insurance Fund for California.

Assuming you are from India, your federal income tax liability is $12,349.

Social Security is 6.2% and Medicare is 1.45%, but you are EXEMPT from these taxes while on OPT. MAKE SURE your employer knows this.

Your California tax liability is $4,223.

Thanks for your prompt reply on that.
Now I am clear about SDI... thanks again for the clarification. Just another clarification though- if I ever get disabled, can I claim the benefits under disability insurance, am I covered there since I am now paying the insurance? Or is the coverage only for US citizens?

So for the tax rates: from what I understand, federal tax rate and the CA state tax rate together is 22.09% in my case.
How I arrived at that one is I added federal tax amt. and the state tax amt. that you mentioned and calculated what percentage is that of the total income for $75,000 (my annual income). Did I get that right?
My calculation: (Fed tax)$12,349 + (CA state tax)$4,223 = $16,572 (for the entire year, I assume)
What percentage of my total income ($75,000) is $16,572..

Is there a fixed percentage of CA-SDI deduction? How is that amount calculated/determined?
And yes, I am from India :-)

Thanks for all your help and information. You are doing a great job.

Quote:

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Originally Posted by AtlantaTaxExpert

The SDI is used to fund the State Disability Insurance Fund for California.

Assuming you are from India, your federal income tax liability is $12,349.

Social Security is 6.2% and Medicare is 1.45%, but you are EXEMPT from these taxes while on OPT. MAKE SURE your employer knows this.

Your California tax liability is $4,223.

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__________________________________________________ _______________
Thanks for your prompt reply on that.
Now I am clear about SDI... thanks again for the clarification. Just another clarification though- if I ever get disabled, can I claim the benefits under disability insurance, am I covered there since I am now paying the insurance? Or is the coverage only for US citizens?

So for the tax rates: from what I understand, federal tax rate and the CA state tax rate together is 22.09% in my case.
How I arrived at that one is I added federal tax amt. and the state tax amt. that you mentioned and calculated what percentage is that of the total income for $75,000 (my annual income). Did I get that right?
My calculation: (Fed tax)$12,349 + (CA state tax)$4,223 = $16,572 (for the entire year, I assume)
What percentage of my total income ($75,000) is $16,572..

Is there a fixed percentage of CA-SDI deduction? How is that amount calculated/determined?

It is my understanding that if you pay the SDI and are deemed a California resident when you become disabled, then you can collect disability. A call to the California Franchise Tax Board can confirm that.

As for your tax calculations, it is not that simple, because both the federal and California income taxes are progressive in nature, which means the rate of taxation goes up as the income goes up.

You can look up the rates and income ranges on the Franchise Tax Board and IRS websites.