How to Get a Refund of Social Security and Medicare Taxes
Are you entitled to a Social Security tax refund?
Mistakes happen. You can accidentally overpay into the Federal Insurance Contributions Act, familiarly known as FICA, for any number of reasons.
FICA is comprised of the Social Security and Medicare taxes that are withheld from your paychecks. You pay half, and your employer pays half—7.65% each for a total of 15.3% of your salary or wages. These taxes represent your self-employment tax if you're self-employed, which you should pay quarterly. You must pay the full 15.3%, or both halves, but you can claim an above-the-line tax deduction or adjustment to income for one half of this amount.
But what if you pay too much in either scenario? What if you're not subject to these taxes for one reason or another but they were withheld or you paid self-employment tax anyway?
You can potentially get the money back, and that's a good thing because although these percentages might sound relatively small, they can amount to a fair bit of change. For example, 7.65% of a $50,000 salary works out to a not significant $3,825. Wouldn't you rather have that money than pay it in FICA taxes?
An Example of an Exempt Taxpayer
Let's assume that Joe Taxpayer is an international student in a master's program in the U.S. He was on optional practical training from August of 2017 through August of 2018. As such, he wouldn't be subject to FICA taxes, but they were mistakenly withheld from his pay anyway because his employer didn't realize this.
He's in the U.S. on an F-1 visa and he's never worked without INS authorization under a student visa, so he should be able to file for a Social Security and Medicare tax refund to recapture taxes he should not have had to pay in the first place.
Here Are the Rules
- Non-immigrant scholars on F-1, J-1, M-1, or Q-1 visas are exempt from Social Security and Medicare taxes. They can claim refunds for their share of these taxes withheld from their paychecks as long as they qualify as non-resident alien taxpayers.
- You must first attempt to claim a Social Security tax refund from your employer. If that fails, you can submit your refund claim to the Internal Revenue Service.
The clearest explanation of this issue can be found in an IRS training manual for volunteer tax preparers, Publication 678-FS.
"An exemption from Social Security and Medicare taxes applies to non-immigrant students, scholars, teachers, researchers and trainees (including medical interns) who are temporarily present in the U.S. in F-1, J-1, M-1 or Q-1 status, as long as they remain non-residents for federal income tax purposes. The exemption also applies to any period in which a foreign student is in 'practical training' or other off-campus employment allowed by the USCIS. Such persons are exempt from Social Security and Medicare taxes as long as they remain non-resident aliens for tax purposes. Those who become resident aliens must start paying Social Security and Medicare taxes."
How to Claim a Refund
The IRS briefly lists the steps for claiming a refund of Social Security and Medicare taxes on its website. You must submit IRS Form 843, Claim for a Refund and Request for Reimbursement. Ideally, you would include a letter from your employer stating how much he reimbursed you, if anything, but if you can't get such a statement, you can include a cover letter instead, attesting that your employer has refused or failed to reimburse you.
Attach a copy of your W-2 for the tax year in question to substantiate how much was withheld from your pay. Boxes 4 and 6 show how much Social Security and Medicare taxes were withheld. Include a copy of the page from your passport that displays your visa stamp, as well as INS Form I-94. You might also have to submit INS Form I-538 and IRS Form 8316 under some circumstances.
Submit your paperwork to the IRS office where your employer files his 941 Forms. If you're entitled to reimbursement, you should receive it. Keep in mind, however, that there's a three-year statute of limitations for claiming tax refunds.
This topic is also discussed in Chapter 8 of Publication 519, the U.S. Tax Guide for Aliens.
NOTE: Tax laws change frequently and the above information may not reflect the most recent changes. Please consult with a tax professional for the most up-to-date advice. The information contained in this article is not tax advice and it is not a substitute for tax advice.