FICA was not withheld from my paycheck

Question

Hello personal finance,

I was filing my taxes for 2016 and I just found out that I transitioned from Non-Resident-Alien to Resident Alien around September last year by passing substantial presence test. After doing some research, I have found out that I qualify as a resident alien for the whole tax year (from January 2016).

Unfortunately, my employer did not know about this change in status, so for all of 2016 no Social Security or Medicare taxes were withheld.

I have found out that I need to correct this, and I need help figuring out a few things.

1. Should I have a W-2 re-issued? I spoke to two accountants and one said I should, the other said I shouldn't. I don't know which one to believe.
2. Who pays for the FICA I should have paid last year? Is it my employer's problem to fix or mine?
3. Should I file the taxes with the old or the new W-2?
4. As best as I understand it, the new W-2 will be written as if I made this contributions. So there will be a discrepancy between what I actually earned and what the W-2 says. How should I handle this discrepancy? Declare it as extra income? Or claim it back in case I earned less than I should have?

Answer 1

Should I have a W-2 re-issued?

A W-2 can be corrected and a new copy will be filed with the IRS if your employer incorrectly reported your income and withholding on a W-2 that they issued. In this case, though the employer didn't withhold those taxes, they should not reissue the W-2 unless they plan to pay your portion of the payroll taxes that were not withheld. (If they paid your share of the taxes, that would increase your gross income.)

Who pays for the FICA I should have paid last year?

Both you and your employer owe 7.65% each for FICA taxes. By law your employer is required to pay their half and you are required to pay your half. Both you and your employer owe additional taxes because of this mistake.

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Your other questions assume that your employer will pay your portion of the taxes withheld. Your employer could decide to do that, but this also assumes that it was your employer's fault that the mistakes were made. If you transitioned to resident alien but did not inform your employer, how is that your employer's fault?

Answer 2

According to this section in Publication 15:

Collecting underwithheld taxes from employees. If you withheld no income, social security, or Medicare taxes or less than the correct amount from an employee's wages, you can make it up from later pay to that employee. But you’re the one who owes the underpayment. Reimbursement is a matter for settlement between you and the employee. [...]

it seems that if the employer withheld less than the correct amount of FICA taxes from you, it is still the employer who owes your FICA taxes to the government, not you. I do not believe there is a way for you, an employee (not self-employed), to directly pay FICA taxes to the government without going through the employer. The employer can deduct the underwithheld amount from you future paychecks (assuming you still work for them), or settle it with you in some other way. In other words, you owe the employer, and the employer owes the government, but you do not directly owe the government.

If they do deduct it from your future pay, then they can issue a corrected W-2, to reflect the amount deducted from you. But they cannot issue a corrected W-2 that says FICA were deducted from you if it wasn't.