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Many immigrants don’t owe FICA tax, yet their employer doesn’t realize it until it’s too late. If you paid FICA tax, yet were exempt, you are eligible for a FICA tax refund.
The fastest way to get it is through your employer, but if that’s not possible, the IRS will issue it too. The process is more complicated and lengthier through the IRS, but either way you’ll get your money back.
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What Is FICA?
The FICA tax is the Federal Insurance Contributions Act tax. Everyone with an earned income pays FICA taxes and usually the employer and employee contribute (the employer pays 50 percent of the tax).
In 2020, the FICA tax rate is 15.3 percent, but only 7.65 percent is your responsibility as an employee. If you own your own business, though, you are responsible for both sides (15.3 percent) of the FICA tax.
Employers send the FICA tax payments in either bi-weekly or monthly depending on the pay schedule and report to the IRS quarterly on IRS Form 941, which reconciles FICA tax, ensuring the employer paid in enough to cover each employee’s portion of the tax.
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Who Is Exempt From Paying FICA Taxes?
Some immigrants are exempt from paying FICA taxes including:
Anyone on an F-1, J-1, M-1, or Q-1 visa
If you’re exempt, yet you don’t tell your employer and provide the proper information, they will deduct FICA taxes from your pay. Once deducted, it’s up to you to ask for a FICA tax refund and provide the necessary documentation to prove why you are eligible for it.
Is There a FICA Tax Refund?
There is a FICA tax refund for immigrants who are exempt from the tax as well as for anyone required to pay FICA, yet who overpay.
This usually happens if you change employers. Since employers aren’t legally obligated to disclose payment information to one another, any subsequent employers wouldn’t know if you’ve already reached the limit of $137,500, at which point you no longer owe FICA tax.
If you make more than $200,000 an additional Medicare tax is assessed, but only at $200,000.
If you end up paying more FICA tax than necessary because of the job change, you may claim the overpayment on Line 69 of your 1040 tax return. The IRS will refund the difference IF you don’t owe any income tax. If you owe income tax (this year or previous years), the IRS will apply the refund to that amount first, then refund you any difference.
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What Happens if Employers Overpay FICA Taxes?
It’s not just employees that may overpay FICA taxes. Mistakes happen and sometimes employers overpay too.
If that’s the case, employers must first reimburse you (the employee). They may then file an adjusted business tax return. If there was an excess payment, the IRS will issue a credit for any future tax obligations.
How Do You Claim a FICA Tax Refund?
If you are exempt from FICA taxes, yet your employer withheld them either out of error or because you didn’t provide adequate information to let them know the type of visa you were on, you are eligible for a FICA tax refund.
Here’s how to claim it:
Ask your employer for a refund
If your employer already issued your W-2 for the year, ask for a corrected W-2
If your employer can’t or won’t refund the taxes, file Form 843, this is a request for a refund from the IRS
If you have to file Form 843, the IRS will contact your employer and ask them to correct their records and issue you a new W-2. Most employers will do what they can to fix the situation with you rather than dealing with the IRS, so starting with the employer is always the best bet.
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Is FICA Tax Separate From Income Tax?
FICA tax and income tax aren’t the same. FICA tax is for Social Security and disability income and is only assessed on earned income - income from a job.
Federal income tax is assessed on all income, not just earned income. For example, you earn dividends on a stock, interest on a bank account, or you receive pension income - you pay income tax on all of it.
Here’s the difference, though. There are no tax deductions on FICA taxes. You pay your portion to pay into the Social Security and Medicare system. There are deductions on federal income taxes. Any deductions you’re eligible for that you itemize on Schedule A or even if you take the standard deduction, lowers your federal income tax obligations, but not your FICA tax obligations.
How to Check Your FICA Tax Refund
You can check the IRS ‘Where’s my Refund’ app to see the status of your FICA tax refund. Keep in mind, these refunds take longer than standard income tax refunds and may take up to 6 months to receive if you have to go through the IRS.
If you get the refund from your employer, you can follow up with them to see the status and ask when you should expect it.
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Get Your FICA Tax Refund Started
If you know you aren’t supposed to pay FICA tax or you overpaid and are eligible for a FICA tax refund, process your request right away.
Like we said earlier, start with your employer. This is the fastest and most direct way to get the refund. Your employer can re-file their business taxes and get the tax credit for future obligations, so it will be a wash for them, but the money is owed to you.
If your employer won’t cooperate for some reason, request the refund from the IRS, but know that it could be up to 6 months before you see it.