New H-1B Status Holders Become Subject to FICA Withholding

October 1 is the first day of the government fiscal year and also the date when H-1B “cap” applicants in the U.S. have their status changed automatically to H-1B.    This is a reminder that employees who may not have been subject to FICA taxes previously (for example, F-1 status holders) are now subject to such withholding. 

H-1B Employees’ Tax Treatment

According to IRS,

For FICA (social security and Medicare) and FUTA taxes, an H-1B employee is treated the same as a U.S. citizen when providing services to a U.S. employer within the United States. The exemption allowed by IRC section 3121(b)(19) does not apply to H-1B non-immigrant status.

See IRS Alert, “Employers Must Withhold FICA Taxes for Aliens who Change Visa Status to H-1B”

Employers and their payroll departments should consider F-1 students (likely working using OPT or CPT) who have secured an H-1B petition and change of status approval under the H-1B “cap” process.    F-1 students are generally exempt from FICA withholding for a period of time; however, once their status changes automatically to H-1B (normally as of October 1st), they immediately become subject to FICA taxes.    Other categories of workers who may have been exempt from FICA are workers on J-1, M-1, or Q-1 status.

Conclusion

It is important for HR/immigration departments to communicate with payroll departments to ensure that any necessary FICA withholding adjustments with respect to H-1B cap employees are done timely.

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By | Last Updated: October 1st, 2024| Categories: Articles, H-1B, News, News Alert|

About the Author: Dimo Michailov

Dimo Michailov
Dimo has over 15 years of experience in US immigration including employment-based immigration benefits, corporate compliance and family based immigration. He represents corporate and individual clients in a wide range of cross-border immigration matters including mobility of key foreign executives and managers, specialized knowledge workers, and foreign nationals with extraordinary ability.

The Capitol Immigration Law Group has been serving the business community for over 15 years and is one of the most widely respected immigration law firms focused solely on U.S. employment-based immigration.   Disclaimer:  we make all efforts to provide timely and accurate information; however, the information in this article may become outdated or may not be applicable to a specific set of facts.  It is not to be construed as legal advice.