CNMI braces for FICA taxes for all CW workers, minimum wage hike
With the recent five-year extension of the CW program, employers of Philippine nationals working in the CNMI must start withholding and paying Social Security and Medicare taxes under the Federal Insurance Contribution Act or FICA starting Jan. 1, 2015. Employers are also bracing for a 50-cent minimum wage increase on Sept. 30, after getting a reprieve last year.
The transitional CW program, which allows the CNMI to retain some 10,000 foreign workers, has been extended up to Dec. 31, 2019.
Delegate Gregorio Kilili C. Sablan (Ind-MP), in an interview yesterday, said there won’t be any more exemption for FICA taxes for Philippine nationals or citizens after Dec. 31, 2014, and that a 50-cent increase in minimum wage will be in effect on Sept. 30 this year as set by the law that also gave the CNMI control over its 3-mile submerged lands.
“There would be no more extension [of FICA exemption]…And I’m not going to spend political capital on getting this because when we got this, there was an understanding that it would be a one-time exemption. So starting January 1st, expect to start paying FICA,” Sablan told Saipan Tribune.
In December 2012, the Internal Revenue Service announced that it will not assert that any taxpayer has understated liability for taxes under the FICA “by reason of a failure to treat services performed before Jan. 1, 2015, in the CNMI by a resident of the Republic of the Philippines as employment under section 3121(b) of the Internal Revenue Code.”
Sablan said this means CNMI employers would have to withhold and pay FICA taxes for most or all employees regardless of citizenship.
IRS, the U.S. government agency responsible for tax collection and enforcement, said “employers must withhold and pay FICA taxes on remuneration paid to residents of the Philippines who do not hold an H-2 status for services performed as employees in the CNMI after Dec. 31, 2014, unless these workers are eligible for FICA exemption based on some circumstances other than the exemption in section 3121(b)(18).”
Filipino workers under the CW program started paying FICA taxes from late 2011 to 2012 until IRS issued a decision not to assert these taxes. Filipino workers received refunds on the FICA taxes they paid.
Prior to Nov. 28, 2011, Filipino workers were considered exempt from paying these taxes. The CNMI remained on a wait-and-see mode, trying to get clarification from IRS regarding the application of FICA taxes as a result of federalization of local immigration.
Workers from China and Korea, among other foreign workers in the CNMI, have been paying FICA taxes.
“Next year, workers from the Philippines, just like everyone else, have to pay these taxes,” the delegate said.
Alex Sablan, president of the Saipan Chamber of Commerce, said yesterday it is “unfair” and “improper” for the U.S. government to “collect taxes from foreign workers that will not benefit from these taxes and are not provided permanent immigration status.”
“This was something we asked for reprieve. But we understand it is now politically unpopular [to ask for another one]. We wouldn’t get another reprieve. Employers have to bear the FICA taxes and also the minimum wage increase,” the president of the largest business organization in the CNMI said.
The Chamber president added that the economy is “improving” so businesses can sustain a minimum wage increase this year. Last year, the Chamber asked for—and received—a reprieve from the 2013 50-cent minimum wage increase through the delegate and Gov. Eloy S. Inos’ help.
The CNMI’s current minimum wage is $5.55 an hour. This will increase to $6.05 an hour on Sept. 30 this year and on Sept. 30, 2016, and every year thereafter until it reaches the federal wage floor of $7.25 an hour.
stealing,another white collar crime.
one of two Sablan’s might be right and the other one might be wrong…..wrong must be out and right must be in…..
Mr. Alex Sablan speaks only in favor of CNMI Corporations and Businesses as he is paid by them, not for the US Citizens of the CNMI. CW workers should be grateful for being able to buy homes in their home country from the (more) money they earned by working in the USA/CNMI, whereas the US Citizens cannot afford to buy homes or in many cases a new car. If the guest worker wants to work here, they must pay employee taxes like everyone else, and many guest workers do indirectly benefit from their US Citizen children’s benefits such as Medicaid, childcare, and food or other welfare programs that cost the US and local governments a great deal of money. The fact of the matter is, the US government is broke and has to borrow money to pay for these programs. So if you think in terms of total government income and spending, our government still overspend more than it’s income. That may not be completely fair, but that’s the way it is, we need the money.
I have said many times before that if our government and private sector leaders cares more about all the people, rather than its own profits and political gains, we would not have so many of these kinds of problems.
Workers can benefit from Social Security, by earning 40 quarters (10 years’ service) and collecting SS when they reach retirement age. Yes, even aliens can collect, and many former Saipan workers collect at home in China, for example. The surviving spouse and children of alien workers can also collect benefits if a worker dies or becomes disabled, even if he or she did not earn 40 quarters, just like American citizens. That having been said, Congress should grant permanent resident status to alien workers who were working here legally for 10 years prior to the CNRA’s enactment. That will solve the CNMI’s labor problems for the foreseeable future.
how about lots of CNMI workers who paid/paying FICA from so many years and they don’t reach the 40 quarters lots of them are left . my father worked here for 8 years but he can’t get back his hard worked FICA because his points are not enough to get back.when he was leaving we went to social security office on saipan officer told us that in order to get back fica tax you must earn 40 quarters plus you must staying on USA soil once you 62 or 64.you will not get it on such countries.they don’t have agreement between such national india,nepal,china etc but they have agreement between canada,europe,ausssi etc.CNMI hard worked FICA tax must be returned to all foreign countries once they decided to go back finally.how about our hard worked FICA tax if we finally go home before 10 quarters or after it ????? we FICA tax payer are not USA citizens/residents.we worked hard and paying easy FICA tax.whoever left before complete 10 points must be returned them hard paid FICA.my father is 66 years old now and he needs his hard worked FICA.who should be responsible for this????social security dept. or USA government ???? what will happen to those hard worked FICA money????who will eat this hard worked money???uncle sam??? i am not blaming anybody but this is the fact. we CNMI asian foreign workers paid/paying tax to FICA plus local taxes not to our nationals so is the responsible for to return back FICA tax is who we paying/paid.we are here temporary so our FICA tax also might be temporary once we go back finally must be return back.i don’t understand the dance of government system for foreigners/citizens.all human being got a same feelings either foreigners or local citizens…please return FICA tax to those who is left the CNMI or who wants to finally go back 10 quarters doesn’t make sense for temporary CNMI foreign workers.i appreciate to those who will work on this important issue.THANKS
your govt and the u.s. govt must have an agreement in order to receive the benefit. have your country initiate discussion with the u.s.
am not being flippant or insulting with my previous comment. i understand your frustration at the unfairness of this. what i am saying is this: the process has to start with your country to have an agreement with the USA to receive this benefit. that is what i was told when i asked about this since there are countless others who are in the same situation like you.