Should a K1 immigrant pay FICA taxes?

[david221g 20]

Hi Guys,

 

Some background-

I entered the US on Feb 2018 and got my EAD card on July 2018.

I started a new job on Aug 2018.

Lastly, I got my Conditional Green Card On Oct 2019.

 

I just noticed that my company never deducted any FICA taxes (social security + Medicare) from my salary . Both my 2018/2019 W2 forms show-

I used a CPA for 2018 tax return and he didnt mention anything about that so I just ignored that.

 

This year I'm using TurboTax and I saw on the app that I owe the IRS thousands of dollars which in my opinion is because i didnt pay any fica taxes.

 

Can anyone here have any advise on whether an EAD holder (while waiting for a gc) should pay FICA? Should a conditional gc holder pay FICA?

 

Thanks,

Dave

 

 

 

[gregcrs2 1,778]

4 minutes ago, david221g said:

Hi Guys,

 

Some background-

I entered the US on Feb 2018 and got my EAD card on July 2018.

I started a new job on Aug 2018.

Lastly, I got my Conditional Green Card On Oct 2019.

 

I just noticed that my company never deducted any FICA taxes (social security + Medicare) from my salary . Both my 2018/2019 W2 forms show-

I used a CPA for 2018 tax return and he didnt mention anything about that so I just ignored that.

 

This year I'm using TurboTax and I saw on the app that I owe the IRS thousands of dollars which in my opinion is because i didnt pay any fica taxes.

 

Can anyone here have any advise on whether an EAD holder (while waiting for a gc) should pay FICA? Should a conditional gc holder pay FICA?

 

Thanks,

Dave

 

 

 

Depending on your income level, Absolutely!

[gregcrs2 1,778]

What it is showing is that you made no money!

[wbeem 568]

I don't understand why it's showing zero taxable income and you owe money.  

As far as owing money if your employer is not withholding deductions, I don't believe you are exempt from any taxes if you earn a taxable level income for the financial year.  If I am incorrect in this statement, please would someone set me straight. 

We fell into this trap when I got my first job after we got married as I've always worked as an employee and I took a job as a contractor for a couple of businesses. There were no deductions withheld. Now, we had no excuse for ignorance because we knew we needed to set money aside and we started doing that but we had no idea how much and somehow we got slack and stopped doing this.  Last year we owed several thousand dollars in tax. Fortunately we were just able to settle it.  I am not sure if IRS allows you to pay over a period of time if you cannot put out the whole lump sum in one go.  I would definitely start working on putting money aside to pay off that debt though, assuming it's correct.  We also use TurboTax and it's always matched up with what IRS has asked for or refunded so we found it to be very accurate as long as the information you enter when you file is complete and accurate.  

Edit to add:  Just wondered, are you filing jointly? And what is your spouse's earning level like?  In our case the debt was made bigger because my husband had taken a new job which paid more than what we had previously so instead of getting a tax refund, our household earnings were substantially more and then adding my job .... 

Edited March 20, 2020 by wbeem

[Wuozopo 4,293]

24 minutes ago, david221g said:

This year I'm using TurboTax and I saw on the app that I owe the IRS thousands of dollars which in my opinion is because i didnt pay any fica taxes.

Not sure that your taxes owed is because of lack of paying any SS or Medicare. Test your theory by going to your W2 in Turbo tax and entering a fake entry. 6.2% of wages for SS and 1.45% for Medicare. 
 

What happens?

 

i am wondering if your employer is thinking K1 is like a student visa so not withholding those. You do need to straighten it out because that is affecting your future benefits. Also employers pay half of your SS and Med contributions. They contribute an additional 6.2% and 1.45% out of their pocket toward your future retirement benefits.

[payxibka 10,045]

2 hours ago, wbeem said:

I don't understand why it's showing zero taxable income and you owe money.  

As far as owing money if your employer is not withholding deductions, I don't believe you are exempt from any taxes if you earn a taxable level income for the financial year.  If I am incorrect in this statement, please would someone set me straight

Taxable income is box #1 on the w2, the OP didn't show that box

[david221g 20]

Thanks everyone!

 

A few clarifications-

1. The picture with all the zeros I uploaded is just boxes 3-6 assigned to SS and Medicare

2. My wife and I file jointly as married couple, my taxable income is around ~130K and my wife's ~80K (not shown in the the picture)

 

I took Wuozopo's advise and I put 'fake numbers' in turbotax (6.2% of wages for SS and 1.45% for Medicare) and the amount I owed to the IRS according to the app remained the same!!

I am so confused as to why I owe so much money. Both my wife and I elected to pay the max in every paycheck (do not withhold..) so we wont owe any money (and will get a check back from the IRS which happened last year). It seems like my employer just didnt deduct enough Federal taxes from my salary.

 

Should I tell my employer to pay their contribution to FICA retroactively (from Aug 2018)? Someone mentioned that if they won't it will affect my future benefits.

 

I'm afraid we owe the IRS for the federal taxes AND the fica taxes I never payed.

getting worse by the second...

 

 

 

Edited March 21, 2020 by david221g

[belinda63 3,038]

OK quick US tax explanation. Federal income tax, social security tax, and Medicare tax are all different taxes. Federal income tax is what you normally deal with when you file your taxes annually. You can adjust the amount of federal tax withheld with your W-4. How much federal tax you owe each year is dependent upon a number of factors such as income, dependents, child tax credit, etc.

Social security and Medicare tax is a flat tax on your income. There is no way to increase or decrease it (unless you make above the limit which is somewhere around $155,000 in which case you don't pay on anything above that amount). So no matter how much you make it has to be paid and your employer also pays a percent. 

 

You need to 1: check your W4 which affects how much federal tax is withheld. I would recommend for both you and your wife you select married filing separately with $0 for dependents. You can also elect to have an additional amount withheld from each check if you desire. 2: Have a discussion with your employer about why you had no Social Security or Medicare Tax withheld. 3. Yes you and your employer are both on the hook for the amount of Social Security and Medicare tax that should have been withheld and was not. 4. Yes not paying into the system means you get less when you collect.

 

Note: I am not a tax professional or a CPA, if you have further questions please consult a professional tax advisor.

[Wuozopo 4,293]

@david221g

 

Contributions to SS and Medicare do not affect taxes owed as you have proven to yourself. 
“Taxable Income” is not shown in box 1 of a W2. That’s gross wages. Your taxable income comes later in the tax calculations after adding in any additional income like interest, dividends, and reducing your income by IRA contributions and the standard deduction.

 

Did TurboTax enter your standard deduction of $24,400 on Line 9? Just wondering if you had any obvious errors.  It’s impossible to evaluate an individual’s specific return without knowing all the other factors, so I have to assume it’s correct.  
 

So you basically have entered into a higher tax bracket with a full year of your wages. Doubled up like that can make your individual witholdings insufficient. For example your wife’s $80k could add an extra $17k to the total tax when piled on top of your income. But her withholding may not be near that. Both of you need to do a new W4  for your employers.  https://www.irs.gov/pub/irs-pdf/fw4.pdf It’s been redesigned for 2020 and is supposed to do a better job of estimating withholding. 

And yes the FICA needs to be sorted. It’s a separate issue from the tax return you are completing right now, but you will ultimately have to pay back your share.  Try this IRS page for some info.  https://www.irs.gov/compliance/criminal-investigation/employer-and-employee-responsibilities-employment-tax-enforcement

[payxibka 10,045]

Taxable gross wages is shown in box 1

[Crazy Cat 41,845]

6 hours ago, david221g said:

I'm afraid we owe the IRS for the federal taxes AND the fica taxes I never payed.

getting worse by the second...

It's time to consult a tax professional for a 2nd opinion.  Sounds to me like either you have made a mistake in TurboTax or you have severely under withheld during the year.

 

[Wuozopo 4,293]

1 hour ago, Lucky Cat said:

It's time to consult a tax professional for a 2nd opinion.  Sounds to me like either you have made a mistake in TurboTax or you have severely under withheld during the year.

 

 
It’s most likely the latter.  Only working 4 months in 2018, their household income may have been $43k + $80k so less than $125k. his withholding was likely at a percentage for a $130k job, yet he only came in that year in the $40k range and was pleased with a refund because he overpaid. 
 

2019 is a full year of income. A jump to $210k in 2019 and thus a higher tax bracket could be the shocker of  taxes $20k more than the total tax of 2018.  Next year won’t be so shocking.  And new W4s can help them get it closer to paying in enough. 

Edited March 21, 2020 by Wuozopo

[Crazy Cat 41,845]

Just now, Wuozopo said:

 
It’s most likely the latter.  Only working 4 months in 2018, their household income may have been $43k + $80k so less than $125k. his withholding was likely at a percentage for a $130 job, yet he only came in that year in the $40k range and was pleased with a refund because he overpaid. 
 

2019 is a full year of income. A jump to $210k in 2019 and thus a higher tax bracket could be the shocker of  taxes $20k more than the total tax of 2018.  Next year won’t be so shocking.  And new W4s can help them get it closer to paying in enough. 

Agree.... and, to me,  that "do not withhold" statement is odd.....time for an analysis and adjustment of withholding...

[david221g 20]

2 hours ago, Wuozopo said:

 
It’s most likely the latter.  Only working 4 months in 2018, their household income may have been $43k + $80k so less than $125k. his withholding was likely at a percentage for a $130k job, yet he only came in that year in the $40k range and was pleased with a refund because he overpaid. 
 

2019 is a full year of income. A jump to $210k in 2019 and thus a higher tax bracket could be the shocker of  taxes $20k more than the total tax of 2018.  Next year won’t be so shocking.  And new W4s can help them get it closer to paying in enough. 

I googled the subject in the last few hours to learn more about it and you nailed it!

 

In 2018 I worked for only 4-5 months and my wife's salary was significantly lower than 2019, therefore we got a nice check since we overpaid.

 

In 2019 I had 2 different issues that you guys already figured-

 

1. FICA:

I didnt pay anything since my employer probably mistaken K1 for something else. Now I need to pay retroactively for 2019 (and probably 2018).

 

2. Federal Tax:

Some basic numbers-

My base salary is $140K and ~$130K taxable income,  I withheld ~17K as federal income tax.

My wife's salary is around ~$85K (she got a raise mid year) and ~80K taxable income, she withheld ~$8K as federal income tax.

Our total tax withheld is 8K+17K=$25K

We file jointly as a married couple, so our total taxable income is 80k+130K=$210K

TurboTax took off 24400 "standard deduction" which brings us to ~$185K.

 

The tax bracket for ~$185K is ~$33K and we only withheld $25K, therefore we owe (according to turbotax) almost $8K.

 

I may owe close to $18K in FICA and federal tax for 2019 and I can only blame myself and my employer's accountant.

Edited March 21, 2020 by david221g

[aratamorne 164]

Is it possible that the employer screwed up the W-2?  Unless he was 1099, they absolutely should have withheld SS and Medicare.