FICA taxes not withheld - taxpayer status changed in mid year

[lyndaj0331]

Taxpayer was on a J-1 visa (student).  Worked in US.  As a non-resident J1 student, she was exempt from FICA.  She got married.  She received her "green card" in May of 2019.  Notified employer of change of status.  Employer changed filing status from single to married, but never changed FICA exemption.  FICA taxes were not withheld for the entire year.  Clients were unaware until received W2s.  They want to do the right thing and pay the FICA (even if it means paying the employer share as well).  Employer does not want to fix and issue corrected W2 on his side.  Is there a way to do this when filing their return?  If so, how.  I thought about showing as self-employment and paying the SE tax, but there was federal and state tax withheld as shown on the W2.

[jo1]

You should be able to do a substitute W-2 and put the numbers on there with an explanation as to what happened.  Have the client follow through with social security in 6 months to be sure it got applied to their account properly.  Pretty sure the gov't will take employee side, not sure if the employee can pay the employer side and show that on the return.  That might take a trip to the SS office directly.  However, that will flag the employer as under reporting, so think it through.

[lyndaj0331]

Thank you so very much for your response.  Even if we do the substitute W2, will that not flag the employer?  They want to keep their jobs.  I don't know what to tell them.  If I just file as is, won't there still be a flag regarding the non-payment of FICA?   The employer has made the change now for 2020. Again, thank you.

[Glossy847]

Look at form 8919 to see if that works for your client

[itonewbie]

No, you should use neither a F.4852 nor a F.8919 for this situation.

F.4852 is used to report wages your client's employer failed to report the correct amount of wages or issue a W-2.  It is not for payment of any shortfall in FICA.  There is also no mechanism for the IRS to retain voluntary payment of FICA.  Any excess credit resulting from such voluntary payment will just be refunded to your client.

F.8919 should not be used.  It is only for folks who believe that they were misclassified as an independent contractor when they are, in fact, employees.  Submitting this form will most likely result in rejection or additional complications as the IRS is very mechanical in how forms are processed and by which unit.

Only the employer can correct the error.  By refusing to correct the withholding and reporting, the employer is in breach of its fiduciary duty to withhold and report as well as to pay over FUTA.  Any unpaid FICA from your client could be a liability of the employer according to the IRC.  The bottom line is that §3121(b)(19) applies only if your client was a nonresident alien and a J visa holder, not if she was a resident alien (under §7701(b) by acquiring a green card, failing to be an exempt individual and meeting substantial presence test, etc.).  In case these talking points still do not convince the employer, her only recourse would be to contact the IRS to file a complaint.

[jo1 · Accepted solution]

I don't think it will flag just because there's no social security, the gov't is relying on the integrity of the employer to calculate correctly.  I have several clients who don't pay directly into social security due to the type of work they do.   To handle it correctly, the employee could give the $$ to the employer and then the employer could amend the 941's and W-2 to reflect the correct amounts.  

[lyndaj0331]

Thank you for your detailed explanation.  I feel much more confident now.

[lyndaj0331]

I meant to hit "accept as solution" to your response.  I don't know how to fix my error.

At any rate, this was the guidance that i needed.  Thank you again.

[itonewbie]

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@lyndaj0331 wrote:

I meant to hit "accept as solution" to your response.  I don't know how to fix my error.

At any rate, this was the guidance that i needed.  Thank you again.

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