F-1 Visa General Rule
Employees in F-1 status who either are currently F-1 students or were F-1 students, but have now graduated and remain in F-1 status, are generally exempt from FICA taxes for five calendar years. An employee holding F-1 status is exempt during a calendar year if the employee is physically present in the United States at any point during that year. Thus, employees who completed their undergraduate degree requirements in four academic years will generally be subject to FICA taxes starting in January of the calendar year after their graduation unless they fall short of the substantial presence test (see information on substantial presence test below) or establish that they maintain a closer connection to a foreign country under one of the closer connection exemptions.
Substantial Presence Test
Employees holding F-1 status who are not “substantially present” are exempt from FICA taxes. An employee is “substantially present” if the employee is physically present in the United States for at least 31 days in the current year and 183 days over the last three-year period. To calculate the days of presence over the last three-year period, count all days of physical presence in the U.S. this year, one-third of all days physically present last year, and one-sixth of all days physically present two years ago. Days that the employee was exempt from FICA taxes should not be counted. For example, employees who just completed their 5-year exemption period should only count days of physical presence in the current calendar year toward the 183-day calculation.
Closer Connection Exception to the Substantial Presence Test
Employees holding F-1 status who meet the substantial presence test may still be exempt from FICA taxes if they fall under the closer connection exception and have not taken steps toward becoming permanent residents. To meet this exception, an employee must be present in the United States for less than 183 days, maintain a tax home (the employee’s regular or principal place of business, or, otherwise, the employee’s regular place of abode) in a foreign country, and maintain more significant contacts with that country than the United States. Factors that can establish more significant contacts include the country the employee designates as the employee’s home on forms and documents, the types of official forms the employee fills out, and the locations of the employee’s home, family, belongings, social/political/cultural/religious affiliations, personal banking, business activities, voting jurisdiction, and driver’s license jurisdiction.
Closer Connection Exception to the Substantial Presence Test for Foreign Students
Employees holding F-1 status who meet the substantial presence test and do not fall under the closer connection exception may still be exempt from FICA taxes if they currently are or recently were students and have not taken steps toward becoming permanent residents. An employee participating in an OPT program is a student for purposes of this exception, since OPT is an extension of F-1 status and the work relates to the employee’s academic degree. To fall under this exception, these employees must prove that they do not intend to reside permanently in the United States, that they have substantially complied with the immigration laws and requirements, and that they have maintained significant contacts with a foreign country, which they can do by establishing the same significant contact factors as the closer connection exception. Because this exception does not require that individuals be present in the United States for less than 183 days or maintain a tax home in a foreign country, employees who currently are or recently were students are more likely to fall under this exception than the closer connection exception.
 In this summary, “students” refers to undergraduate students working off-campus and in compliance with the Immigration Services’ requirements.
 For purposes of both closer connection exceptions, steps that an employee holding an F-1 Visa may take toward becoming a permanent resident include, but are not limited to, filing: Form I-508 (Waiver of Immunities), Form I-485 (Application for Status as a Permanent Resident), Form I-130 (Petition for Alien Relative), Form I-140 (Petition for Prospective Immigrant Employee), Form ETA-9089 (Application for Alien Employment Certification), and Form DS-260 (Application for Immigrant Visa and Alien Registration).
 For example, filling out Form W-8 (Certificate of Foreign Status) demonstrates intent to reside in the United States only temporarily, whereas filling out form W-9 (Payer’s Request for Taxpayer Identification Number) or Form 1078 (Certificate of Alien Claiming Residence in the United States) demonstrates an intent to remain in the United States.
Attorney Advertising. Prior results do not guarantee a similar outcome. This publication is provided as a service to clients and friends of Harter Secrest & Emery LLP. It is intended for general information purposes only and should not be considered as legal advice. The contents are neither an exhaustive discussion nor do they purport to cover all developments in the area. The reader should consult with legal counsel to determine how applicable laws relate to specific situations. ©2020 Harter Secrest & Emery LLP