W2 correction due to FICA taxes

[rtax1]

Hi,

My wife is exempt from paying FICA taxes so she reached out to her employer to get W2 corrected. The employer is saying they will reach out to ADP to get it corrected. The employer is  not giving any specific timeline when we will get corrected W2 so that they can process refund of FICA to her. They are saying timing will be dictated by ADP.  We file joint returns. She is on F1 and I am on H1B status. 

Given we are close to filing timeline of April 15, Our CPA is giving us two options Option 1: file extension Option2: file return now and then amend it later. Looking to see what option we should go with? Can everyone please opine?

[Opus 17]

First of all, an F1 visa holder is only exempt from Medicare and Social Security tax while they are working within the scope of their educational visa. They are not exempt from those taxes if they take a job that is outside the scope of their visa.

Assuming that you are correct, and that your wife will eventually receive a refund of the incorrectly withheld Social Security and Medicare tax and will receive a corrected W-2 showing zeros in box 3, 4, 5, and 6, that will not affect your federal tax return. The federal tax return is based on box 1 taxable wages, and as long as the box 1 taxable wages don’t change, nothing else that might change will change the federal tax return or require an amended return. 

however, if she is an F1 visa holder who has been in the country less than five years and is exempt from Social Security and Medicare tax, then she is also considered a non-resident for income tax purposes and cannot file a joint return with  you—unless you make an election to treat her as a US resident for income tax purposes.  You may have made this election already, but if not, you may want more information for your situation.

[rtax1]

We have filed joint returns last year and she has elected to be a US resident since we filed jointly.  From what I understand she is still exempt from social security and medicare taxes because this exemption is not related to F1 visa only it applies to students in general (this was mentioned to me in this forum). She has worked in a field related to her current ongoing studies.

Can you please opine in our situation?

[Opus 17]

@rtax1 

As I said, information from box 3-6 is not reported on an income tax return (except in 1 rare situation), so if only boxes 3-6 change, there is no reason to wait, and no need to file an amended return when the W-2C arrives.  

(The rare exception is if she earns more than the social security wage base of $160,200 for 2023, and also has schedule C self-employment, so that a change in boxes 3-6 would change the amount of self-employment tax she owes on the side gig.)

[rtax1]

Got it. We will go ahead and file returns. Both Federal and State. Thank you so much for help.

[rtax1]

I discussed this with my CPA and he said I need to mandatorily file an amended return if my spouse gets corrected w2. Can you please opine?

[Vanessa A]

It will not hurt to file an amended return if you do not need to file one to report FICA changes.  However, it will not make a difference in your federal return if boxes 3 through 6 are the only boxes that have changed.  

The reason for you to amend would be if you wife plans to collect social security and she needed proof that she DID pay FICA taxes IF the employer did not report it to the SSA.  Basically, the primary reason to amend for be for later "proof" in case of error on your or her SS benefits. 

Since she is getting a refund of her FICA taxes, again, this will not affect your return, it would only be "proof" that she did not pay into SS and would not be eligible for benefits.  But this is not an IRS thing, it is a SSA thing.

[rtax1]

Hi, To confirm amendment wouldnt be mandatory? You recommend filing amendment?

[Opus 17]

---

@rtax1 wrote:

Hi, To confirm amendment wouldnt be mandatory? You recommend filing amendment?

---

No.  While I understand @Vanessa A 's point about being able to prove social security contributions (if, in the future, there is a disagreement about how much she paid into the system), that can't be done on form 1040.  Your form 1040 contains no information about social security taxes withheld, no matter if you are filing with a first or corrected W-2.   Your Turbotax data file contains information about your social security taxes, but that is not a legal document and is not proof of anything, because you can type anything you want into the program and create a data file showing anything.  (You can create a data file showing you are a millionaire.  It's meaningless by itself.)

If you feel that sometime in the future you might need proof that your wife paid social security tax, the only document that will do that is the W-2 itself.

And in fact, if you tried to amend a tax return and your actual tax doesn't change (because you are only changing boxes 4-6), the program won't even process it or let you file.  

To verify the record of social security contributions, you can get a wage and income transcript from the IRS (they get their information from employers) or you can get your social security wage and tax record from the social security administration.