Change in Residency Status and FICA Exemption

January 15, 2015

The University is not required to withhold Federal Insurance Contribution Act (FICA) tax (i.e., social security and Medicare tax) from salary and wages paid to a nonresident alien in F-1, J-1, M-1 or Q-1 status performing services to carry out the purpose of his/her visa.  FICA tax withholding applies to salary and wages only; it does not apply to fellowship payments.  If you are currently receiving fellowship payments, you will not see the FICA tax withholding on your paycheck.

Based on a review of University records, your tax status will change from that of a nonresident alien to a resident alien during the calendar year 2015.  As a result of your change in tax status, salary and wages paid to you after December 31, 2014 will be subject to FICA tax withholding.

FICA Tax Withholding

For the calendar year 2015, a combined FICA tax rate of 7.65% (6.2% for old age, survivors, and disability insurance (OASDI) and 1.45% for hospital insurance (Medicare)) is imposed on both the employer and employee.  The OASDI rate (6.2%) applies to wages within the OASDI wage base, which is $118,500 for the calendar year 2015.  There is no wage limit for the Medicare portion of the FICA tax.

Note:  Although income tax treaties generally do not provide an exemption from FICA tax withholding, the United States has entered into international social security “totalization” agreements with certain countries.  A totalization agreement does not provide an exemption from social security tax in both countries; however, it enables an individual to pay the tax to only one country.  For questions on benefits under these agreements contact the Social Security Administration’s Office of International Programs at (410) 965-3322 or (410) 965-7306 or the Social Security Administration (SSA) at 1-800-772-1213. The Social Security Administration website is http://www.ssa.gov/international/totalization_agreements.html.

In addition, IRS Publication 519, U.S. Tax Guide for Aliens, provides information regarding the FICA exemption you can find this publication at the Internal Revenue Service (IRS) website www.irs.gov/file_source/pub/irs-pdf/p519.pdf

Please consult with your tax advisor with respect to your personal tax situation.

If you have any questions regarding this notice, please contact the University Tax Department at 432-5597 or 432-5530 or email daysi.cardona@yale.edu.