texasjan

OH has been working here for a year on L1 visa and his employer witholds taxes. Does that mean they also withold social security and medicare taxes? There was nothing on his W2, just said federal income tax withheld.
thank you

Rete

W-2 would show all monies withheld from earned income. If it is not noted as being deducted, then it has not been.

Is there anything there for say state taxes, FICA, etc.?

texasjan

Nope, just two boxes filled in - 1 Wages and 2 Federal Income Tax witheld

Noorah101

Does his paystub give a breakdown of taxes withheld? What is listed there?

Rene

texasjan

Paystub just says federal income tax withheld. Would it normally list other taxes seperately there, not just under one tax heading?

Rete

Yes, both the paystub and the W-2 lists all the deductions. Apparently the employer only deducted federal. Don't know if there is state tax in Texas.

Jscl

A few professions, e.g. some teachers, do not have to pay social security taxes and therefore it's not withheld from their income. What does your hubby do?

Steve_

There are no State income taxes in Texas. No-one is exempt from paying FICA on their employment income, there are some very limited exemptions for religious workers and foreign students iirc but they have to specifically file paperwork to opt out, i.e. state it on their W-4 in answer to question 6. Certain govt. workers were previously exempt and those exemptions were grandfathered in, but they were retired back in the 1980s.

There is a FICA "holiday" this year, but it's a reduction, not an elimination.

I'd check with whoever did the payroll because that W-2 doesn't sound correct to me.

texasjan

ah someone has suggested it may be to do with the dual taxation agreement with UK, as the company is supposed to be preserving our benefits there.
The accountant is still working on USA 2010 tax return, so it may become clearer once that it issued.
Thank u

Steve_

Well then they've ballsed it up then, if he's working in the US he had to pay FICA (social security and medicare). L visas are not eligible for an exemption from FICA as explained in the instructions to Form 8843

I have to say this is the first time I've come across it happening like this. It's usually the other way around, the person is eligible and their payroll company is clueless. Somehow you are supposed to divine that in answer to question 6 on form W-4 that you are supposed to state you are exempt and why (usually "non-resident alien student" as explained in an obscure part of IRS publication 519).

I convinced the IRS to redesign form W-4 for 2010 and later tax years so that it now says: whereas before it just contained some nonsense about Form 8233 which is not commonly used by non-resident aliens. Unfortunately Notice 1392 is written in legalese and is very hard to understand.

However regardless of whether you're filing as a non-resident alien or US resident (for tax purposes), you have to pay FICA, unless specifically exempt.

My best guess is that their payroll company has pressed the wrong button in their software. (NB I should add there may be some obscure tax treaty provision they're relying on given the job your husband may be doing - I seriously doubt it though from the description you've given.)

JAJ

In fact, most L1 holders from the United Kingdom should be exempt from FICA/Medicare for up to 5 years. They need to provide a certificate evidencing that they continue to contribute to United Kingdom social security.

http://www.ssa.gov/international/Agr....html#coverage

texasjan

Well, steve and JAJ you have me totally confused now ha ha

Steve_

Yeah he's right, I'd forgotten there was a totalization agreement with the UK, I'm usually dealing with US-Canada stuff. So in fact there is a treaty provision they may be relying on and you need to get the exemption certificate from HMRC if you haven't already

Are you making voluntary NI contributions? http://www.hmrc.gov.uk/cnr/osc.htm

You can make voluntary class 2 NI contributions by applying using the form at the end of these instructions: http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf

Regardless of your current W-2 problem, you should do this anyway as the contributions are peanuts (like £12 a month I think) and are dwarfed by the amount you would receive from your UK govt. pension on retirement. Remember you only have to make 30 years worth of contributions to get the full pension, if you're not sure how many years you already have, you can get a statement from the Dept. of Work & Pensions. (I was quite surprised when I got mine that they'd included years where I had only had a part-time job as a kid).

There may be logic in paying the social security taxes in the US anyway if you plan on staying, because then you get two govt. pensions, rather than one. Even with a few years of contribution you'd get something, but not much. You'd have to work it out from the info on www.ssa.gov but it's 6.2% up to $106,800 of earnings, 4.2% this year only.

texasjan

thx, OT company is paying NI in the UK, so we keep our benefits when we go back. He already has the required 30 years (old git lol)
Was thinking about paying into the USA system though, as our daughter (19) now has a US boyfriend and is keen for us to get green cards so she can stay! Hmmm I know we have to look at the tax implications first though
thanks again