Are OPT Students Exempt From FICA Taxes?

The Federal Insurance Contributions Act (FICA) mandates a U.S. federal payroll tax contributing to Social Security and Medicare programs. This tax is crucial for funding benefits for retirees, individuals with disabilities, and children of deceased workers. FICA taxes are typically withheld from an employee’s paycheck, with both the employee and employer contributing to these funds.

Optional Practical Training (OPT) provides temporary employment authorization for F-1 non-immigrant students in the U.S. It allows students to gain practical work experience related to their major area of study. This training can occur before or after completing academic studies, typically for up to 12 months.

Understanding FICA Exemption for Non-Residents

Non-resident aliens in the U.S. are generally subject to different tax rules than U.S. citizens and resident aliens. This distinction is significant for FICA taxes, as certain non-immigrant visa holders may be exempt for a specific period. An individual’s tax residency status often hinges on the “substantial presence test.”

The substantial presence test assesses an individual’s physical presence in the U.S. over a three-year period. To meet this test, a person must be present for at least 31 days in the current year and 183 days over the three-year period, calculated using a specific formula. If the total equals or exceeds 183 days, the individual is generally considered a resident alien for tax purposes.

However, certain non-immigrant visa holders, including F-1, J-1, and M-1 students, are considered “exempt individuals” for the substantial presence test for a specified duration. This means their days of physical presence in the U.S. are not counted towards the test during this exemption period. For F-1 students, this exemption typically applies for the first five calendar years they are present in the U.S.

This FICA exemption for non-resident aliens applies as long as their services are allowed by U.S. Citizenship and Immigration Services (USCIS) and are closely connected to their visa’s purpose. If an F-1 student maintains non-resident alien status for tax purposes, they generally remain exempt from FICA taxes.

FICA Exemption for OPT Students

The FICA exemption rules for non-resident aliens extend to F-1 students participating in Optional Practical Training. As long as an F-1 student maintains non-resident alien status for tax purposes, they are typically exempt from FICA taxes on wages earned during their OPT period. This includes initial 12-month OPT and any subsequent STEM OPT extension, provided they remain a non-resident for tax purposes.

The FICA exemption for F-1 students, including those on OPT, is usually valid for the first five calendar years of their physical presence in the U.S. A calendar year runs from January 1 to December 31; even if a student arrives on December 31st, that year counts as one of the five exempt years. This five-year period dictates when an F-1 student transitions from non-resident to resident alien status for tax purposes.

Once an F-1 student has been present in the U.S. for more than five calendar years, they generally become classified as a resident alien for tax purposes under the substantial presence test. At this point, the FICA exemption typically ends, and they become subject to Social Security and Medicare taxes, similar to U.S. citizens. This change in tax status occurs regardless of whether they are still pursuing studies or are engaged in OPT.

For example, an F-1 student who arrived in the U.S. in January 2020 would generally be exempt from FICA taxes through December 31, 2024. Starting January 1, 2025, they would typically become subject to FICA taxes, assuming they meet the substantial presence test. This transition occurs even if they are still on OPT or STEM OPT.

Correcting FICA Withholding Errors

If an OPT student believes FICA taxes were incorrectly withheld from their paycheck, they should first attempt to resolve the issue directly with their employer. Contact the employer’s payroll department and request a refund of the erroneously withheld FICA taxes. If the employer agrees, they can issue a refund and provide a corrected Form W-2c.

If the employer is unable or unwilling to issue a refund, the student can seek a refund directly from the Internal Revenue Service (IRS). This process typically involves filing two forms: Form 843, Claim for Refund and Request for Abatement, and Form 8316, Information Regarding Request for Refund of Social Security Tax Erroneously Withheld on Wages Received by a Nonresident Alien.

Form 843 is a general claim form used for tax refund requests, including Social Security and Medicare taxes withheld in error when an employer will not adjust the overcollection. Form 8316 provides information for non-resident aliens seeking a refund of Social Security taxes erroneously withheld.

When submitting these forms to the IRS, include supporting documentation:
Copies of Form W-2 showing FICA taxes withheld.
A copy of the passport and visa.
A copy of Form I-94.
A copy of Form I-20 or DS-2019, including any employment authorization documentation like the Employment Authorization Document (EAD).
A written statement detailing the unsuccessful attempt to obtain a refund from the employer.