Seeking the experts out there. My colleague from overseas was hired on to the job about 6 years back (Feb 2009) out of college while she was on OPT. She was exempt from paying FICA taxes at the time but later that year (~June 2009) got her H1B work visa and our employer has failed to deduct FICA taxes all this while. We had an audit earlier this week and that is when the company realized this and informed her today. She is freaking out over the amount she could potentially owe and is considering hiring a lawyer. Couple of questions that may help her out. 1. Will she be responsible to pay all those taxes? Whose responsibility is it to update the W-4 once she got H1B status? (Keep in mind the company did all the paper work). 2. Our employer didn't pay their half either, so I'm certain that they are on the hook for that. Are they responsible for paying that matching amount as well as any penalties and interest or does it all fall on her? 3. How much of FICA taxes do you actually get back after retirement? Is it the entire amount you put in plus company match given to you as a monthly check (over how many years?) or is it some other calculation that is used? 4. Does she have a case in hiring a lawyer and fighting this out? Her main point of contention would be that the company did all the paperwork to get her the H1B at which point they should have made her non exempt from FICA taxes and start withholding the taxes. Educated responses appreciated, troll responses too.
All foreign workers are responsible for taxes in the US, just like any US citizen. You are responsible for your own taxes, even if the employer was not deducting, she should have been making quarterly tax payments. (ignorance of the law is not a defense) She should work with the company to update the W-4 to begin deductions. They may even be able to over-withhold to help her catch up. The employer will be responsible for paying their part. It is wrong to think about getting back taxes after retirement...both Medicare and Social Security pay for current enrollees...what you are entitled to later is a calculation based on how much you've paid in...but is paid out of the fund at the time you collect and is subject to whatever rules/regulations and calculations at the time of collection....it is not like a savings account. Also remember: federal taxes other than medicare and social security will be owed if that was not withheld either.
She should be 100% liable. It's her responsibility to update her W-4 and pay her portion of the taxes.
W-4 has nothing to do with FICA taxes, only Income tax withholding. It is a complicated issue. Both are responsible for the taxes. The IRS would most likely work with her to recover her portion of the taxes, possibly including an offer in compromise. The IRS can go after the employer to recover both portions if they can't get the amounts from her.
I would suggest withholding extra money, say two hundred a paycheck, and claiming zero with an updated W-4. And play catch up with her tax returns.