Who should pay Social Security and Medicare Tax?
Nonresident aliens on F-1, J-1, M-1 or Q-1 visas are NOT subject to social security and Medicare taxes (FICA) if services are performed to carry out the purpose for which you are admitted to the United States [IRC sec. 3121(b)(19)]. This generally includes on-campus work for which authorization is granted on Form I-94, Arrival and Departure Record, or Form I-20, Certificate of Eligibility for Nonimmigrant Student Status.
A nonresident alien admitted to the U.S. as a student is not permitted to work off campus for a wage or to engage in business unless given approval by the Immigration and Naturalization Service (INS). This should be noted on the student’s copy of Immigration Form I-20, or Form I-688B, Employment Authorization Document. Off-campus work due to severe economic necessity or for optional practical training is considered by the IRS to qualify for the exemption. The IRS does not consider other off-campus work performed by a nonresident alien student to be performed to carry out the purpose of a student visa.
Resident aliens, as well as nonresident aliens on F-2, J-2, M-2, Q-2 or any other types of visas, are not exempt from FICA taxes as nonresident aliens. However, IRC section 3121(b)(10) provides an exemption from FICA for services performed in the employ of a school, college, or university, if the service is performed by a student who is enrolled and regularly attending classes at that school, college or university. Therefore, international students who do not qualify for the exemption for nonresident aliens may be exempt under this provision. On the other hand (to add a bit more to the confusion), the law allows states to provide Social Security coverage for services performed by students for the public school the student is attending under agreements established with the Social Security Administration. If a state has exercised its option to provide for coverage of student services, section 3121(b)(10) of the Code provides that those services will not qualify for the student FICA exception. If you wish to read the official announcement from the IRS on who might qualify for this student exemption, here it is: :Rev. Proc. 98-16.
What happens if Social Security and Medicare taxes were withheld? (You could Obtain a Refund)
If FICA has been withheld from your wages by mistake (look in box 4 of your W-2), you should first ask the employer who withheld the tax for a refund. We can help you to write an official letter to the employer. If the employer does not grant a refund, a refund can be claimed from the IRS on Form 843. A copy of Form W-2, your visa, INS Form I-94, INS Form I-538 (if you have one), and a statement saying “tax was withheld by mistake and my employer denied me a refund.” This form is sent in its own envelope (separate from your tax return) to Internal Revenue Service Center, Philadelphia, PA 19255.
If you are in the United States only temporarily for work or study and are not exempt from social security under one of the above provisions, your U.S. social security contributions may provide benefits in your home country under a “totalization agreement” that the U.S. has negotiated with several other countries. For more information on totalization agreements and the countries participating go to the Social Security Administration’s Office of International Programs site.
How To Avoid this problem in the first place and get Your Employer To Withhold The Proper Amount
If your country’s treaty with the U.S. qualifies you for a treaty exemption on your wage or scholarship income, you must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the payor of the exempt income. You must include with Form 8233 a statement detailing your eligibility for the specific tax treaty exemption. You will find sample statements for each treaty country in Publication 519, Appendix A (for students) and Appendix B (for teachers and researchers). Form 8233 and Publication 519 can be downloaded from the U.S. Treasury’s Forms and Publications site.