US FICA Exemptions For Foreign Students
Generally, under the immigration laws, foreign students may be studying in the United States in one of three categories:
Under the immigration rules, foreign students are authorized to work on the campus of their
authorized institution for a maximum of 20 hours a week while classes are
in session. They may work full-time on campus when classes are not in
session, such as during summer vacation. F-1 students may be employed for
"economic hardship" if they obtain an employment authorization document
(EAD) from the immigration service. F-1 students may also be employed
under a program of curricular practical training (CPT). Foreign students
may be employed off-campus for practical training related to their field
of study. The allowable periods of training vary by their immigration
category and, in the case of J-1 students, by their academic
The Student FICA Exception
Section 3121(b)(10) of the Internal Revenue Code (the "Code") provides an exception from FICA tax for students who are employed by a school, college, or university or a section 509(a)(3) affiliate. The exception applies regardless of the type of institution - private or public, tax-exempt or for-profit.
The exception does not require that students be a U.S. citizen in order to qualify for the FICA tax exemption. Therefore, foreign students, whether their residency status is resident or nonresident, are eligible for the Student FICA Exception under the same rules that apply to students who are citizens.
To qualify for the Student FICA Exception, students must be enrolled and attending classes at the institution. In order for their employment to qualify for the exception from FICA tax, it must be incident to and for pursuing a course of study at the employer institution. Therefore, full-time employment does not qualify for the Student FICA Exception.
However, they may work full-time during school vacations. Although the Student FICA Exception does not apply to full-time employment, foreign students may be exempt from FICA tax on their full-time employment under the NRA FICA Exception.
The NRA FICA Exception
Section 3121(b)(19) of the Code provides an exception from FICA tax for services performed by nonresident aliens temporarily in the United States in "F", "J", "M" or "Q" status for employment performed to carry out the purpose specified by the individualís immigration status. ("Q" status individuals are cultural visitors.) This exception is called the NRA FICA Exception.
Foreign students qualify for the NRA FICA Exception if:
This FICA exception is more liberal than the Student FICA Exception because it applies to on-campus employment during official breaks, authorized off-campus employment, and practical training including at a corporation.
Foreign students who fail to meet the conditions for the NRA FICA Exception because they become RAs are still eligible for the Student FICA Exception for on-campus employment.
Paula Singer, Esq. CEO of Windstar Technologies, Inc. and partner in the tax law firm, Vacovec, Mayotte & Singer, Newton, MA has over 25 years of experience providing advice and compliance services to employers on cross-border employment matters. For more information, visit www.windstar.com. For additional information, call 1-800-259-6398 or email: firstname.lastname@example.org
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