My_question_is: US-specific
Subject: TN Visa and FICA
Expert: taxman at centa.com
Date: Tuesday September 14, 2004
Time: 03:02 PM -0700
QUESTION:
Sir,
I wrote to you a few months ago regarding my work on a TN visa for five years with a US company. I am a Canadian citizen. During those five years, they did not withold FICA tax. They were required to and have now started to withold it and have paid the back taxes for both my portion and theirs. They are now asking me to repay my portion of the taxes back to them.
Can they legally make me pay back the money that was not witheld that they paid to the government?
Thanks
====================================================
david ingram replies:
I answered the first one back on February 17, 2004. I am pleased to see that they are now conforming as I suggested that they had to.
If they had deducted at the time, you would have paid it and it seems fair to me that you would pay it now. On the other hand, you (like all of us)_ assumed for 4 1/2 years anyway that they were doing it correctly and likely spent it all. Today, they likely want $25 to $35,000 dollars for the catch-up and that is a rude blow to you. I do not "KNOW", but expect that they can legally enforce the deduction. They should, of course, make it as easy and painless as they can. Maybe a raise of $450 a month and they deduct $300 a month to pay back the FICA. Seems fair to me. The payroll clerk / manager / HR person who set it up that way in the first place should pay half as their own penalty.
However, that is only a suggestion and guess and proof that I do not know all the answers. I am putting this out on my list and will see if one of the US professionals have a better and more official answer.
----------------------------
For the benefit of other readers, this is the original question here:
My_question_is: US-specific
Subject: TN and Social Security
Expert: taxman at centa.com
Date: Monday February 16, 2004
Time: 08:00 AM -0800
QUESTION:
I have been working in the US for 5 years under a TN visa. My empolyer has
not been withholding Social Security and Medicare. I approached them two or
three time in regards to this stating that I thought they should be
withholding it and they said they didn't have to. I have recently
discovered that I the should have been withholding it.
Who is responsible for my share of the five years worth of Social Security
taxes? Since I approached them about it I don't believe I should be
responsible.
Thanks
================================
david ingram replies:
A usual penalty for employers who fail to make payroll deductions is for the employer to have to pay both halves of the deduction.
You might want to complain to the State payroll authorities.
It is possible for an employee to work in the US for five years without paying FICA and medicare. However, it has to be for an employee who is transferred for a period of less than five years AND the company has to write and get written confirmation from the Social Security Administration that the specific employee is exempt from Social Security deductions.
AND, in these cases, the company and employee then contribute to Canada Pension Plan in Canada. This does NOT create a Canadian Tax problem by the way.
However, if you were to complain, that would put you in a negative position with the employer.
You might show them this as a indicator of what should have been done.
You are not alone by the way. Every year I get a dozen TN and H1B holders who have not had FICA deducted. This is serious because it will affect your retirement.
This from ask an income tax immigration planning and bankruptcy expert consultant guru or preparer from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
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