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cachick · Jan 14, 2008, 07:09 AM

Hi,

I was wondering what I needed to pay in terms of social security. I went to school for four years in the United States (Fall 2003 to Spring 2007) and I am currently working on OPT for a year. Our company accountant says I do not have to pay Social Security since I am not a resident so it is not currently being taken out of my check.

I am curious about 2008 tax year though since I will be on an F-1 visa for half the year and then I will change my status to TN status. Will I have to pay Social Security for 2008 since it is my sixth year here and I will become a resident alien for tax purposes? I also did some reading about electing to be taxed as a dual-status (nonresident for half the year and resident for the other half) what are the advantages of this? Do I have to file this way, or would it be easier to file as a resident?

Thanks!

AtlantaTaxExpert · Jan 14, 2008, 01:19 PM

CAChick:

Your exempt status expired on 31 December 2007, because on 1 January 2008, you entered your SIXTH year on F-1 status.

The exempt staus (which exempts you from the SUbstantial Presence Test and from all FICA taxes) is good for ONLY five years. If you are in the U.S. for ANY part of a year, that year counts, which is why the 4-5 months in 2003 counts as a full year.

This is the tax effects for 2008:

First, you will file as a resident alien for 2008. Dual-status will NOT apply in your case UNLESS you depart the U.S. for a significant amount of time and return under a different visa.

Second, you ARE subject to FICA taxes (Social Security and Medicare taxes) for 2008. You have a legal obligation to inform your employer of this fact. I recommend that you do so IN WRITING (email is a good way to do this), and you should keep a copy of the email for your records.

Once you have informed your employer of this fact in writing, you have MET your legal obligation. If the employer then fails to withhold the FICA taxes, the IRS will NOT hold you responsible, but rather the EMPLOYER will be required to pay any back taxes for 2008, plus fines plus interest.

If the company accountant still does not believe you, give him my email or have him PM me and will enlighten him about the five-year rule.

cachick · Jan 14, 2008, 01:57 PM

Thank you very much for your detailed answer. I called the IRS today at lunch to ask them about it. I tried to explain to her that I was technically in my 6th calendar year, and she kept thinking that I was not complying to my F-1 student visa if I was in my sixth year etc. It was a very difficult conversation. She stated that I would be exempt until August of 2008, making it 5 full years. I wasn't sure how correct she was which is why I am glad you answered me. So I will inform my employer that he needs to withhold.

Since I will be taxed as a resident for 2008, what implications does this have compared to filing as a NR? Also, if I am paying Social Security here, will I have to pay into the Canada Pension Plan as well? Or is there a treaty for that as well?

Thanks for your help!

AtlantaTaxExpert · Jan 14, 2008, 03:17 PM

CaChick:

You called the wrong IRS line. Call the International Tax Hotline at 215-516-2000.

However, what I told you is accurate. I am sure Texas Tax Expert will confirm when he reviews the forum this evening.

As for Social Security payments, they will be credited to your Canadian account under the totalization agreement that the U.S. has with Canada.