Document on Tax Exemption for OPT Students and Students on F1B visa

In response to question asked by few posters on document or proof stating that OPT students are not required to pay Social Security Taxes and Medicare tax, please see document excerpt and link to the document below. You can share it with your employer. Please note even if you are on OPT, your non-immigrant status is F1B.

As per IRS site these are the following excerpt

Social Security and Medicare Taxes:

If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. Your payments of these taxes contribute to your coverage under the U.S. social security system. Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance (Medicare) benefits to individuals who meet certain eligibility requirements.

In most cases, the first $106,800 of taxable wages received in 2009 for services performed in the United States is subject to social security tax. All taxable wages are subject to Medicare tax. Your employer deducts these taxes from each wage payment. Your employer must deduct these taxes even if you do not expect to qualify for social security or Medicare benefits. You can claim a credit for excess social security tax on your income tax return if you have more than one employer and the amount deducted from your combined wages for 2009 is more than $6,621.60. Use the appropriate worksheet in chapter 3 of Publication 505, Tax Withholding and Estimated Tax, to figure your credit.

If any one employer deducted more than $6,621.60, you cannot claim a credit for that amount. Ask your employer to refund the excess. If your employer does not refund the excess, you can file a claim for refund using Form 843

In general, U.S. social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. In limited situations, these taxes apply to wages for services performed outside the United States. Your employer should be able to tell you if social security and Medicare taxes apply to your wages. You cannot make voluntary payments if no taxes are due.
Students and Exchange Visitors :

Generally, services performed by you as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if the services are performed to carry out the purpose for which you were admitted to the United States. This means that there will be no withholding of social security or Medicare taxes from the pay you receive for these services. These types of services are very limited, and generally include only on-campus work, practical training, and economic hardship employment.

Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien as discussed in chapter 1, even though your nonimmigrant classification (“F,” “J,” “M,” or “Q”) remains the same.

Services performed by a spouse or minor child of nonimmigrant aliens with the classification of “F-2,” “J-2,” “M-2,” and “Q-3” are covered under social security.

Nonresident Alien Student :

If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or salary or to engage in business while you are in the United States. In some cases, a student admitted to the United States in “F-1,” “M-1,” or “J-1” status is granted permission to work. Social security and Medicare taxes are not withheld from pay for the work unless the student is considered a resident alien.

Please point your employers to this link from IRS and see section "Social Security and Medical Taxes". Remember this hold only if you are considered non-resident alien for tax purposes. Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien as discussed in chapter 1, even though your nonimmigrant classification (“F,” “J,” “M,” or “Q”) remains the same.

Definition of Resident Alien :

Resident aliens generally are taxed on their worldwide income, similar to U.S. citizens.To be classified as a resident alien, the individual must meet one of two tests:

Green Card

A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant. This status usually exists if the Bureau of Citizenship and Immigration Services has issued a green card.

Substantial Presence in US

A non-resident alien is classified as a resident alien for tax purposes if they were physically present in the U.S. for 31 days during the current year and 183 days during a three-year period that includes the current year and the two years immediately before that.

Information on Tax Exemptions for OPT Students

Most of the students who are on F-visa or on Optional Practical Training (OPT) having a legitimate job should remember that they are exempted from U.S. Social Security (FICA) and Medicare taxes. These students should inform their employer about this to avoid inappropriate deduction from their pay.

OPT students, who recently applied for H1B FY 2010 should also make sure that their employer must start deducting U.S Social Security and Medicare taxes from 1st October 2009 (start date for their H1B visa). Failure to do so could lead to heavy tax penalties during annual tax return.

Below is some information on certain classes of alien employees are exempt from U.S. social security and Medicare taxes

Resident aliens, in general, have the same liability for Social Security/Medicare Taxes that U.S. Citizens have. (Please see Resident Aliens definition for Tax purposes)

Non-resident aliens, in general, are also liable for Social Security/Medicare Taxes on wages paid to them for services performed by them in the United States, with certain exceptions based on their non-immigrant status. The following classes of non-immigrants and non-resident aliens are exempt from U.S. Social Security and Medicare taxes:

• A-visas: Employees of foreign governments are exempt on salaries paid to them in their official capacities as foreign government employees.
• The exemption does not automatically apply to servants of employees of such foreign governments.
• The exemption does not apply to spouses and children of A non-immigrants who are employed in the United States by anyone other than a foreign government.

• D-visas: Crew members of a ship or aircraft may be exempt if the vessel is a foreign vessel and the employer is a foreign employer, or if the services are performed outside of the United States
• Crew members of an American vessel or aircraft who perform services within the United States ARE subject to Social Security and Medicare taxes.
• Crew members of an American vessel or aircraft who perform services outside the United States ARE subject to Social Security and Medicare taxes if:
• the employee signed on the vessel or aircraft in the United States; or
• the employee signed on the vessel or vessel outside the United States but the vessel or aircraft touches a U.S. port while he is employed thereon.

• F-visas, J-visas, M-visas, Q-visas: Non-resident Alien students, scholars, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other aliens temporarily present in the United States in F-1,J-1,M-1, or Q-1/Q-2 non-immigrant status are exempt on wages paid to them for services performed within the United States as long as such services are allowed by USCIS for these non-immigrant statuses, and such services are performed to carry out the purposes for which such visas were issued to them.

• Exempt Employment includes:
• On-campus student employment up to 20 hours a week (40 hrs during summer vacations)
• Off-campus student employment allowed by USCIS.
• Practical Training student employment on or off campus.
• Employment as professor, teacher or researcher.
• Employment as a physician, au pair, or summer camp worker

• Limitations on exemption:
• The exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 non-immigrant status.
• The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
• The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 non-immigrants who change to an immigration status which is not exempt or to a special protected status.
• The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 non-immigrants who become resident aliens.

• G-visas: Employees of international organizations are exempt on wages paid to them for services performed within the United States by employees of such organizations.
• The exemption does not automatically apply to servants of employees of such international organizations.
• The exemption does not apply to spouses and children of G non-immigrants who are employed in the United States by anyone other than an international organization.

• H-visas: Certain non-immigrants in H-2 and H-2A status are exempt as follows:
• An H-2 non-immigrant who is a resident of the Philippines and who performs services in Guam;
• An H-2A non-immigrant admitted into United States temporarily to do agricultural labor.