General Social Security Tax Rules
Most people who earn wages in the United States are required to contribute to the Social Security and Medicare programs through payroll contributions. Contributions are required regardless of a worker's residency status. A total contribution of 15.3% of gross wages is required for each worker, half of which is contributed by the employer. Therefore, the amount the employee pays is 7.65% (6.2% for Social Security and 1.45% for Medicare). The maximum taxable wage for Social Security is $128,400 in 2018 (this amount is adjusted each year). The Medicare tax continues on all wages, and is increased for higher income earners.
The prize for these contributions is retirement and disability benefits, but only if enough credits are earned to become eligible. A maximum of four credits can be earned each calendar year, based on earnings. In the year 2018, a worker must receive $1,320 in covered earnings to get one Social Security or Medicare credit, and $5,280 to get the maximum of four credits for the year. It takes 40 credits to be eligible for retirement benefits. The number of credits required for disability payments depends on a worker's age and when they become disabled. You can read more about Social Security credits here.
Exemption for Nonresident F, J, M and Q Workers
Reflecting the realization that short-term nonresident workers will likely never earn enough credits to become eligible for benefits, the Internal Revenue Code specifically exempts from withholding a narrow group of nonresidents who are students, scholars or short-term visitors. Here is the actual Code language that exempts from the definition of "employment" for Social Security tax purposes the earnings of F, J, M and Q visa holders:
[The term employment does not include] . . . Service which is performed by a nonresident alien individual for the period he [or she] is temporarily present in the United States as a non-immigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act, as amended, and which is performed to carry out the purpose specified in subparagraph (F), (J), or (M), as the case may be . . . [IRC Section 3121(b)(19).]
In other words, if you are a nonresident, an F, J, M or Q visa holder, and your work is authorized by your visa, you are not required to make payroll contributions of Social Security and Medicare tax. Once you become a resident for tax purposes, or change your visa to one outside this group, you are subject to Social Security and Medicare tax withholding.
What To Do If the Tax Is Withheld
If you fall into the category of workers who are exempt from Social Security tax, you need to make sure your employer is aware of the exemption. If you are currently working, check your pay slip and make sure there is no deduction for Social Security or Medicare tax. It could be labeled "FICA" (Federal Insurance Contributions Act) tax. If you see that money is being withheld for this tax, talk to your employer right away and point out that you are exempt. Ask your employer to stop withholding and refund the money that was already withheld. The fact that your employer will receive a matching refund is an incentive for your employer to agree to file amended employment returns. If your employer refuses to grant you a refund, all is not lost - you can still ask for a refund from the IRS. Nonetheless, it is generally easier and quicker to get the refund from your employer, especially if you are still employed. Even if you have already returned to your home country and discovered that FICA tax was withheld, the first step to obtain a refund is still to request it from your former employer.
Requesting The Refund From The IRS
If your employer refuses to grant a refund, the IRS has a procedure you can follow to obtain the refund directly from the IRS. The forms that must be filed are Form 843 (Claim for Refund and Request for Abatement) and Form 8316 (Information Regarding Request for Refund of Social Security Tax Erroneously Withheld on Wages Received by a Nonresident Alien on an F, J, or M Type Visa). You must also include the following:
- A copy of your Form W-2 to prove the amount of Social Security and Medicare tax withheld,
- A copy of the page from your passport showing the visa stamp,
- INS Form 1-94,
- (For students) INS Form I-538 (Certification by Designated School Official), and
- (According to IRS Publication 519) "A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or that you authorized your employer to claim. If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer."
The last requirement is to assure the IRS that a refund for the same tax is not issued twice. If the employer simply refuses to issue a refund to you or request one from the IRS, the statement should indicate this. It is very important to secure a statement from your employer, or write a very convincing explanation of why the statement could not be obtained.
Submit this information to the IRS at:
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0038
Then you wait . . . and wait . . . and wait . . . and wait some more. The IRS is very diligent in processing these refund requests, and apparently very under-staffed in this unit. We have experienced waits of as long as two years! That said, if all the information requested by the IRS is submitted, a refund is eventually issued.
Forms 843 and 8316 are not complex, so you can complete them yourself, but they must be completed accurately to obtain a refund. The forms have instructions to consult if you get stuck. If you would like us to do this, we charge $150 to complete the forms and submit the entire package to the IRS (payable on submission). Our fee includes follow-up phone calls to the IRS, and re-submission of any information the IRS requests. For no additional fee, will continue dog the IRS for you until a refund is issued.
Our US Tax Guide for Foreign Nationals is a comprehensive overview of how the US tax system taxes resident and nonresident aliens. The section on Social Security Tax and Employer Withholding provides more information on who must pay social security tax, how to obtain a refund, social security totalization agreements, and how to get your employer to withhold the proper amount.