The Tax Moves Blog

FICA (Federal Insurance Contributions Act) taxes are payroll taxes that fund two major U.S. government programs: Social Security and Medicare. These programs provide financial support for retirees, disabled individuals, and those who meet specific eligibility criteria.

1. Components of FICA Taxes

FICA taxes are divided into two parts:

• Social Security Tax (OASDI – Old Age, Survivors, and Disability Insurance)

  • Funds retirement benefits, survivor benefits, and disability insurance.
  • The tax rate is 6.2% for employees, with employers matching the same amount.
  • Wage cap: In 2024, Social Security tax applies only to wages up to $168,600. Earnings beyond this limit are not subject to Social Security tax.

• Medicare Tax (Hospital Insurance – HI)

  • Supports healthcare coverage for individuals aged 65 and older and some disabled individuals.
  • The tax rate is 1.45% for employees, and employers also contribute 1.45%.
  • No wage cap: Unlike Social Security, all wages are subject to Medicare tax.
  • Additional Medicare Tax: Individuals earning over $200,000 (or $250,000 for married couples filing jointly) pay an extra 0.9% in Medicare tax, but this extra tax is only paid by employees, not employers.

FICA taxes are automatically withheld from employees’ wages in the U.S. Both the employer and employee contribute equally. Self-employed individuals pay a similar tax under the Self-Employment Contributions Act (SECA) but at a higher rate (15.3%) since they cover both the employee and employer portions.

J-1 visa holders are generally considered nonresident aliens for tax purposes during their first five years in the U.S. Nonresident aliens are not eligible for Social Security and Medicare benefits, so they are exempt from FICA taxes.

However, employers sometimes erroneously withhold these taxes from J-1 visa holders’ paychecks. If this happens, J-1 holders have the right to request a refund either from their employer or, if necessary, from the IRS.

Key Takeaways

• FICA taxes fund Social Security and Medicare programs.
• Employees and employers each contribute 6.2% for Social Security and 1.45% for Medicare.
• There is a wage cap for Social Security tax, but not for Medicare tax.
• J-1 visa holders are typically exempt from FICA taxes during their first five years in the U.S.
• Incorrect withholdings can be refunded by the employer or the IRS.

The U.S. tax system distinguishes between resident aliens and nonresident aliens for tax purposes.

• Most J-1 visa holders are classified as nonresident aliens for their first five calendar years in the U.S. under the Substantial Presence Test.
• Nonresident aliens are not eligible for Social Security and Medicare benefits, and therefore, they are not required to contribute to these programs through FICA taxes.

This rule is based on the principle that only those who can potentially benefit from Social Security and Medicare in the future should contribute to these programs. Since J-1 visa holders are typically in the U.S. temporarily and may not qualify for these benefits, they are exempt from paying FICA taxes.

The IRS (Internal Revenue Service) and the Social Security Administration (SSA) clearly state that:

✅ J-1 visa holders in nonresident alien status are exempt from FICA taxes.
✅ Employers should not withhold FICA taxes from their wages.

This exemption applies to J-1 visa categories such as:

• Research scholars
• Professors
• Short-term scholars
• Students
• Interns and trainees
• Teachers

Despite the clear IRS rules, some employers mistakenly deduct FICA taxes from J-1 visa holders’ wages. This happens due to:

🔹 Lack of awareness of the J-1 tax exemption rules.
🔹 Payroll systems that automatically deduct FICA taxes from all employees.
🔹 Misclassification of J-1 visa holders as resident aliens.

J-1 visa holders should proactively inform their employers about their FICA exemption and check their pay stubs regularly to ensure these taxes are not being withheld.

f you are a J-1 visa holder and have noticed that Social Security and Medicare (FICA) taxes have been deducted from your paycheck, you may be entitled to a refund. Because J-1 visa holders are generally exempt from FICA taxes during their first five years in the U.S., these withholdings are often made in error due to employer misclassification or payroll system mistakes.

This guide outlines the steps to recover FICA taxes that have been incorrectly withheld.

Before requesting a refund, you should ensure that:

✅ You are a J-1 visa holder in nonresident alien status (typically within your first five years in the U.S.).
✅ You are employed under an eligible J-1 category (e.g., student, researcher, professor, teacher, trainee, intern, or physician).
✅ Your employer withheld Social Security and Medicare taxes from your paycheck.

🔎 How to Check: Look at your pay stubs or W-2 form (Box 4 for Social Security tax and Box 6 for Medicare tax). If any amounts appear in these boxes and you are still in your exempt period, then your employer made an error.

Your employer should be the first point of contact because they have direct control over payroll corrections.

Steps to Take with Your Employer:

1️⃣ Inform them about the exemption: Provide documentation from the IRS and Social Security Administration (SSA) confirming that J-1 visa holders are not subject to FICA taxes.
2️⃣ Request a correction and refund: Ask the employer to correct past withholdings and issue a reimbursement.
3️⃣ Follow up: If the employer agrees to refund the taxes, they will need to adjust their payroll records and may file amended tax returns (Forms 941 and W-2c) to correct the error.

🚨 Important: Employers are legally required to comply with IRS tax regulations, so most will correct the mistake once they are informed. However, some may be unaware of the rules or reluctant to process the refund.

If your employer refuses or is unable to refund your FICA taxes, you can apply for a refund directly from the IRS.

Steps to Request a Refund from the IRS:

1️⃣ Gather Your Documents:

• Copies of your pay stubs showing FICA tax deductions.
• Form W-2 (if available).
• A written statement or documentation proving that your employer refused or was unable to issue a refund.

2️⃣ File IRS Forms for Refund:

• Form 843 (Claim for Refund and Request for Abatement) to request a refund.
• Form 8316 (Information Regarding Request for Refund of Social Security Tax) as supporting documentation.

3️⃣ Submit Your Request to the IRS:

• Mail your completed forms and supporting documents to the IRS following the instructions on Form 843.
• The processing time may vary, but it typically takes several months to receive a refund.

As a J-1 visa holder, you are generally exempt from FICA taxes (Social Security and Medicare) during your first five years in the U.S. However, many employers mistakenly withhold these taxes due to misclassification in payroll systems or a lack of knowledge about tax exemptions for nonresident aliens.

To avoid unnecessary deductions and prevent delays in recovering withheld taxes, it is crucial to take proactive steps before you start working and regularly monitor your payroll records.

Many FICA tax errors happen because employers assume all workers are subject to these taxes. To prevent this mistake:

✅ Communicate your tax-exempt status early – preferably before your first paycheck is processed.
✅ Provide supporting documentation: Share IRS guidelines confirming that J-1 visa holders should not pay FICA taxes (e.g., IRS Publication 519: U.S. Tax Guide for Aliens).
✅ Verify your tax residency status: Remind your employer that J-1 visa holders are nonresident aliens for the first five years and should not be classified as U.S. residents for tax purposes.

📌 Pro Tip: If you are unsure whether you qualify for the FICA exemption, consult IRS Revenue Procedure 2005-77, which explicitly states that nonresident J-1 visa holders are not subject to these taxes.

Even if your employer acknowledges your exemption, errors can still occur due to payroll system updates or human mistakes. Review every paycheck and ensure that:

❌ No Social Security tax (6.2%) is deducted.
❌ No Medicare tax (1.45%) is deducted.
✅ Only federal and state income taxes (if applicable) are being withheld.

If you notice FICA tax deductions on your pay stub, act immediately to correct the issue before the end of the tax year, as it is much easier for your employer to refund you than to claim a refund from the IRS later.

📌 Where to Look on Your Pay Stub?

• Box 4 on Form W-2: Shows the total Social Security tax withheld.
• Box 6 on Form W-2: Shows the total Medicare tax withheld.
• If any amount appears in these boxes and you are still within your exempt five-year period, the deductions were made in error.

To prove your FICA tax exemption, it is useful to have the following documents readily available:

📄 Copy of your DS-2019 (Certificate of Eligibility for Exchange Visitor Status).
📄 Passport with J-1 visa stamp.
📄 I-94 Arrival/Departure record, showing your J-1 admission.
📄 Employment contract or job offer letter, specifying your role under the J-1 program.

These documents help clarify your nonresident alien status in case of any disputes with your employer or the IRS.