Payroll Problems

[jasdlm]

I do the payroll for an employer that has about 15 employees. I just learned that 3 are currently on F1 visas and 3 were on F1 visas in 2009 until 4th quarter, when they received H1 status. I hadn't been asking for Visas when they gave me the new employment information each time someone was hired (salary, W4, etc.). Clearly my error.

So . . . now it seems to me that I have to amend my W2/W3s for 2009 and amend all 4 941s for 2009 because I should not have been withholding or paying FICA/Medicare for the employees. Does this seem like the appropriate course of action?

Also, It seems most logical to amend the 941s and carry the 'credit' into 2010 (although the credit will be both for employer paid taxes and taxes withheld from employees) and simply have the company issue checks to employees covering all of the employee FICA/Medicare tax for 2009.

Anyone familiar with this please let me know if this seems like the right approach. I have never dealt with employees with F1 visas before, so this is all new to me. I have talked with the Immigration Attorney for the company, but she is not conversant with the tax side of the issue; only enough to confirm that they should not have been paying FICA.

The intent is that eventually all of these employees will be on H1 Visa status. It seemed to me in reading the information on the IRS website that perhaps this intent precluded the social security exemption. ***The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status.*** However, the immigration attorney felt certain that the exemption applied until the start date of H1 status. Why doesn't the IRS language just state 'this does not apply to H1 visas'???

Thanks in advance. This is really bad timing. Aaargh!

[mircpa]

jasdlm

Individuals here in US of F1/J1 visa do not pay FICA taxes nor do employers.

[jasdlm]

Thanks, mircpa. Do you think the fix I've suggested is appropriate?

[kcjenkins]

Yes, that is the way I would do it. Just repay the workers, and amend the 941's and either get a refund or apply it forward.

[Pacun]

Please make that their visas were active at the time they were working. If they violated the visa rules, they didn't have a visa anymory and they must pay taxes.

[jasdlm]

Thanks to all. This board is the best tax resource there is.