[shyl123]

Hi,

I have been working with my employer 'X' since Jan 2012 till now. I was on F1 visa from March 2011 till Oct 1st 2012 when my employer filed H1B for me. X did not withhold social security and medicare taxes from my wages until Apr 2013.

I got H1B approval notice in Oct 2012 from HR and assumed that they would take care of notifying it to payroll. When I checked my W2 for 2012 and noticed that social security and medicare was not withheld, I notified HR in March 2013 that they should withhold medicare and social security taxes from my wages.

I have already filed my taxes for 2012 and paid all the taxes that I owed. As I do not pass substantial presence test, I do not owe social security and medicare taxes for 2012 and I did not pay them.

Now my employer is asking me to pay my part of taxes for 2012(from Oct to Dec). My HR also told me that it was a mistake from the side of HR that they failed to notify payroll. She also mentioned that they need to backdate this change.
My question is, is it legal to ask me to pay backdated taxes? I don't want to pay the taxes that I don't even owe, and then file amended tax return to get it back from the IRS.

What should I do?

[JudyKayTee]

I'm not sure it's anyone's responsibility to notify payroll other than yours. You owe the taxes, no question. Wny would you think paying them is not your responsibility?

Of course, you could always refuse and see if you lose your job.

[joypulv]

You are both at fault. You should have noticed that nothing was withheld and HR should have notified payroll. Go sit down in person and work it out. In the purely practical sense, you are the one who should also contact the IRS about not owing taxes for last year, because your employer can't do that. (You will probably be told to file an amended return though.)
You can call the IRS... it's a frustrating experience because you have to go through successive levels of expertise, telling your story in detail to each person, before you get someone who actually knows anything.

[ebaines]

First it is indeed your responsibility to pay the SS taxes that were not properly withheld. You can do this in one of two ways - either do as they suggest and have it withheld from your pay over the next month or too, or amend your 2012 income tax to report the underpayment of SS tax and write the IRS a check. If they withhold from your pay in 2013 the problem is that they will have to amend their reporting to the IRS so that the tax is credited against 2012 wages - I think that's what they meant by "back dating." They have to file an amended employer's return to correct the amount of SS they withheld from employees against 2012 wages and the amount they should have contributed, and most likely they will end up paying interest charges on this late payment. There are two reasons for amending the 2012 numbers: (1) so that you get credit with the SSA for SS taxes paid on 2012 wages (this can affect your benefit amounts down the road), and (2) so that it doesn't appear that they have withheld too much SS tax against your 2013 wages. They should issue you a corrected W2 for 2012, but you will not have to file an amended return for 2012 as long as the amount of federal wages reported is the same as on your original W2, as it should be - the only change would be that the corrected W2 should report SS tax withheld.

Bottom line is - ask questions about how the SS will be reported on a corrected W2, and be prepared to have the additional amount withheld.

One other thing - as for whether legally you are liable for paying taxes now that they were obligated to withhold last year the answer is no - if an employer makes a mistake which isn't caught until the next year the IRS has the right to collect the back taxes from the employer. So for example if you quit your job tomorrow so that your employer couldn't withhold from your paycheck the IRS could (and would) go after the company to pay both their share and yours. But obviously if you want to keep your job with your current employer this is not the tactic to take.

[AtlantaTaxExpert]

Ebaines covers it well.

The simple fact is that even though you could legally skate on paying the FICA taxes for 2012, you do have the ethical responsibility to do so. It is best to let the company amend their returns to properly credit your SSA account for 2012.

[MukatA]

shyl123,
Your H1-B income is subject to Social Security and Medicare taxes. Your employer made a mistake of not withholding these taxes. Now they are claiming it from you.
Yes, you should pay it back.