a- Social Security Tax (FICA)
A social security tax (called “FICA”) is automatically withheld from the paychecks of all citizens and permanent residents. That money goes into a retirement system that pays a pension to retired workers. Because participants are in non-immigrant status, they will not be part of that pension plan, and the social security tax should not be withheld from paychecks.
b- Federal Income Tax
The government automatically withholds a percentage of all paychecks to be held as federal income tax. This will be withheld from participants’ paychecks as well. In January, students will receive an official statement (called a W-2) showing how much was earned during the previous year and how much tax was withheld. Make sure participants supply an accurate home country mailing address so they can receive the form as quickly as possible. They may consider leaving a self-addressed, postage paid mailing envelope with the employer for faster delivery.
By April 15, participants must file an income tax form. If participants are already back in their home country, they can get this form and the relevant instructions from the U.S. Embassy or Consulate in their home country, or they can print them out from the Internal Revenue service web site (www.irs.gov). If participants earned less than $2800 in a year, they will not owe a federal income tax, and the money that was withheld will be refunded. If they do owe a tax and not enough was withheld, the balance must be paid.
Taxes are not automatically refunded. Participants have to file a tax return in order to receive a refund (if a refund is due).
c- Sales Tax
Most cities and most states charge a sales tax on all purchases. This tax is added onto the price of the item when it is purchased. The sales tax rate varies from city to city and state to state.
Participants can usually expect to pay about 6%-7% more for any item than what the price tag indicates.