Many people over the years have made the case that it doesn’t seem fair for H1B visa holders to pay taxes for Social Security and Medicare when they are not U.S. citizens. However, the IRS website is very clear on this point:
"Wages paid to resident aliens employed within the United States by an American or foreign employer are subject to Social Security/Medicare taxes under the same rules that apply to U.S. Citizens."
The publication U.S. Tax Guide for Aliens, No. 519, addresses any exceptions or special cases. This guide goes on to specify that, "Resident aliens are generally taxed in the same way as U.S. citizens. This means that their worldwide income is subject to U.S. tax and must be reported on their U.S. tax return. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens."
While the IRS does not offer a specific justification for this on its website, there are three reasons that can be inferred from the above statement and the nature of the federal government.
The Green Card Track
H1B visa holders are living and working in the U.S., so they are on track to become citizens. Although not all follow through, a significant percentage do go on to get their green cards. If they do, they become eligible to receive Social Security and Medicare like all other citizens. No one can see the future, so it’s safer to have everyone pay into the system in case they intend on gaining citizenship at some point.
The federal department that that handles tax-related issues is far removed from the one that deals with current immigration status. It would be prohibitively expensive to set up and enforce a different set of laws for such a relatively small population with an unpredictable schedule of status changes. Of the approximately 193 working Americans, only about 650,000 are on H1B at any given time.
The Privilege of Work
There are many benefits to working in the U.S., and paying federal taxes is considered to be the price of accessing those benefits. Without these taxes from both employers and employees, the federal government would not be able to operate with the same productivity and the benefit of working in the U.S. would be diminished.
Tax Law in 2017 and Beyond
There are likely to be many changes in the tax code over the next few years. Seek out assistance from a tax professional who is up to date with the latest changes. Some tax laws are complex and open to interpretation, so make sure you hang onto as much documentation as possible.
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