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Employer Failed to withold FICA Taxes.....

Employer Failed to withold FICA Taxes.....

Old Oct 26th 2011, 1:40 pm
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Default Employer Failed to withold FICA Taxes.....

I transfered to the US in 2004 on an L1 visa. My employer paid UK National Insurance by international transfer on my behalf instead of US Social Security. This was deducted from my bi-weekly pay check. However, from Jan 2009 to Dec 2010, my employer stopped deducting anything for National Insurance from my paycheck and did not make any payments to UK National Insurance or US Social Security. This was a clerical error on their part but I did not catch this on my pay stub or W2.

In Jan 2011 I received a green card and so starting paying FICA. It was then I noticed the difference in my pay and I informed HR that there was a problem. I have since left the company for a new position. I was recently contacted by my former employer who want to pay their part of the FICA owed for 2009-2010. However, they cannot make their payment until I pay my share (which is a large sum). So, my question is - am I liable for this payment or is this on my former employer as it was their error?
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Old Oct 26th 2011, 8:47 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Well you have to pay a part and they pay the other half, so you'd still be on the hook for half of it.
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Old Oct 26th 2011, 9:14 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Originally Posted by THFC1 View Post
I transfered to the US in 2004 on an L1 visa. My employer paid UK National Insurance by international transfer on my behalf instead of US Social Security. This was deducted from my bi-weekly pay check. However, from Jan 2009 to Dec 2010, my employer stopped deducting anything for National Insurance from my paycheck and did not make any payments to UK National Insurance or US Social Security. This was a clerical error on their part but I did not catch this on my pay stub or W2.

In Jan 2011 I received a green card and so starting paying FICA. It was then I noticed the difference in my pay and I informed HR that there was a problem. I have since left the company for a new position. I was recently contacted by my former employer who want to pay their part of the FICA owed for 2009-2010. However, they cannot make their payment until I pay my share (which is a large sum). So, my question is - am I liable for this payment or is this on my former employer as it was their error?
According to earlier posts you came to the US on an L-1 and always paid NIC contributions instead of US Social Security and Medicare payments; this was based on your assumption that you were not going to remain in the US and so would not require to ever use Medicare of receive a Social Security check in old age.

While it might have been a clerical error, how come after some 6 years of paying NIC contributions you did not spot that you were no longer paying them?

If you want credit for 2009-10 Social Security payments then I think you have no choice but to pay up.
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Old Oct 26th 2011, 10:21 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Originally Posted by SanDiegogirl View Post
If you want credit for 2009-10 Social Security payments then I think you have no choice but to pay up.
What if he's not bothered one way or the other? The employer could well be in legal difficulties with the federal government if it came to light that they had failed to withhold and pay the required social security and medicare taxes. The OP may be able to leverage that with the ex-employer.
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Old Oct 26th 2011, 11:23 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Well he reported it as a problem to his, then HR, so I presume he does 'bother' one way or the other.
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Old Oct 27th 2011, 2:45 pm
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Default Re: Employer Failed to withold FICA Taxes.....

While it might have been a clerical error, how come after some 6 years of paying NIC contributions you did not spot that you were no longer paying them?
__________________________________________________ _______________

The error happened at the same time as may salary changed and the company moved to online pay stubs. I didn't check them over very well so did not notice the mistake.

I am not too concerned with getting credit for 2 years of NIC payments. My main concern is 1) being on the wrong side of the IRS/Taxman and 2) having to find $10k+ to make the back payments.
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Old Oct 27th 2011, 4:31 pm
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Default Re: Employer Failed to withold FICA Taxes.....

I would imagine they'll get their money off you one way or another. I had a similar thing happen to me in the UK and wound up having to pay taxes due to some clerical error though they allowed me to set it up as a payment plan rather than a lump sum.
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Old Oct 27th 2011, 4:51 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Originally Posted by THFC1 View Post
I am not too concerned with getting credit for 2 years of NIC payments..
You should be, unless you intend to make voluntary contributions to NI. You're indicating that you came to work in the US for a UK employer. Under the US/UK Totalization Agreement, that employer can only pay NI, in lieu of SS and Medicare, for 5 years. After that point, they are required to with hold FICA, and not NI.

http://www.ssa.gov/international/Agr...k.html#monthly
(scroll up to: Coverage and Social Security taxes)

Originally Posted by THFC1 View Post
My main concern is 1) being on the wrong side of the IRS/Taxman and 2) having to find $10k+ to make the back payments.
Using the 2011 maximums (I can not find 2009 or 2010), the tax rate is 6.2% for employers on a maximum of $106,000. The employee rate is 4.2%, or $4,452. Two years prior may be less than $10k, unless the percentages were higher (I do not know). For 2011 only, $10k+ only applies to self-employed individuals.

SS taxes are not paid to the SSA, but to the IRS (under Title VIII). If you now pay the SS (in arrears), your 2009 and 2010 tax return would be incorrect as regards your income declarations (overpaid).

As for all IRS taxes, the onus is on the individual to be sure the amount of tax being paid is correct. Sorry, but that's how they work. It is the law to contribute to SS if, as in your case, the individual is being paid for work in the US and are liable for US taxes.

http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/435

http://ssa-custhelp.ssa.gov/app/answ.../contributions

You're in a hard place, and not entirely of your own making. That's unfortunate. But you might be better served if you attempt to correct the situation, and forget about trying to make someone else pay for what was ultimately your own obligation.
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Old Oct 27th 2011, 4:57 pm
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Default Re: Employer Failed to withold FICA Taxes.....

I'm assuming that you will be able to file an adjusted tax return for the years that social security payments were not withheld if you now pay them instead. The payment of the ss payment will lower your taxable income; perhaps enough to cover at least 1/2 of the amount due.
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Old Oct 27th 2011, 5:14 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Originally Posted by Rete View Post
I'm assuming that you will be able to file an adjusted tax return for the years that social security payments were not withheld if you now pay them instead. The payment of the ss payment will lower your taxable income; perhaps enough to cover at least 1/2 of the amount due.
There will presumably be interest (and possibly penalties) on the late SS contributions though.
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Old Oct 29th 2011, 9:03 am
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Default Re: Employer Failed to withold FICA Taxes.....

I ended up in a similar situation in my first position. I think I was exempt from FICA for a while as I was nonresident for tax purposes (? can't recall exactly if that was it), and when I became resident for tax purposes, this was missed by my employer and by me. I realised it when I completed my tax return for that year and informed my employer. They arranged for me to make up the lost payments on my side and they made up the missed payments on their side. I think this was spread over a tax year or two, and as pointed out, it ends being less "in your pocket" than it looks, because your tax bill otherwise is reduced.

It always seems odd to me that when people find out their employer underpaid them, they are on it like a flash and insist on getting what they are owed. When their employer screws up and it means they got paid more than they should (albeit in this case being due to incorrect taxation), the same principle does not apply for some reason. No-one likes paying money, but a debt is a debt, regadless of who you owe it to.
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Old Nov 2nd 2011, 6:13 pm
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Default Re: Employer Failed to withold FICA Taxes.....

Originally Posted by theOAP View Post
You should be, unless you intend to make voluntary contributions to NI. You're indicating that you came to work in the US for a UK employer. Under the US/UK Totalization Agreement, that employer can only pay NI, in lieu of SS and Medicare, for 5 years. After that point, they are required to with hold FICA, and not NI.

http://www.ssa.gov/international/Agr...k.html#monthly
.
Thanks theOAP. I did not know about the 5 year rule and so this makes sense now. It looks like after 5 years they did correctly stop my NI contributions. However, the error was that they did not start FICA instead. Hopefully the debt will go down slightly when I restate my 2009/10 earnings but it looks like I will need to settle this debt.
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