[Timbergal]

I have not withheld SS & Medicare taxes for my H1b employee. (My company paid for his H1b, so we were aware of the status change.) Am I liable for both employer and employee portions of the past tax or can I collect the employee's portion from him?

[AtlantaTaxExpert]

Timbergal:

If he properly notified you of his visa status (and you have so indicated that), then he fulfilled what was required of him.

The IRS position on such matters is clear: It is the EMPLOYER'S responsibility to pay all FICA taxes. It then rests with the employer to collect the employee's share of the FICA taxes from his pay.

If you failed to collect the taxes for 2007, you CAN and SHOULD begin collecting the taxes retroactive to 1 January 2007. You are within your legal right s to do so, as the H-1B employee is liable for such taxes.

However, In my opinion, the deadline to collect these taxes from the employee for 2006 has passed. If you failed to withhold the taxes and did not begin collection action by 31 January 2007 (the deadline for filing the last Form 941 for 2006), it is then, in my opinion, effectively too late to collect these taxes legally from the employee.

However, that does NOT relieve you, as the employer, of the obligation to PAY these taxes. The payment is still due in the eyes of the IRS. You just cannot collect the 2006 back taxes from the employee.

Now, if the employee cooperates, you may enter into an agreement where the employee can pay the 2006 back taxes voluntarily. Just remember that you have NO LEGAL STANDING to force him to pay these taxes.

Last point: This is more a legal issue than a tax issue. It would probably be best if you contacted a tax attorney and get an opinion on the legal aspects of this matter.