OIA continues to be sympathetic to CNMI’s concerns on FICA tax

U.S. Interior Assistant Secretary Tony Babauta said the Office of Insular Affairs continues to be sympathetic to requests of federal tax exemptions for Filipino and Korean workers with Commonwealth-only worker status, even as half a year had passed since employers started deducting FICA from these employees.

FICA stands for Federal Insurance Contribution Act. FICA taxes cover Social Security and Medicare.

“We continue to be sympathetic and I met, not just my staff, with the IRS [Internal Revenue Service] to kind of give them a picture of the CNMI, to try to express to them the concerns of the businesses here,” Babauta told Saipan Tribune.

Babauta said this request from the CNMI is “under active consideration” by IRS.

He said there is still no telling whether a six-month-old lawsuit by the CNMI government against IRS over FICA will have an impact on IRS’s “active consideration” of the CNMI’s concerns.

“I’m not sure how that affects their consideration of the issue or if the presence of the case itself prevents them from taking any administrative action.but I do know that they have been working on it for a while since we have talked to them and they have received the letters and everything else from the CNMI,” Babauta added.

The Fitial administration, the Saipan Chamber of Commerce, and many of the affected Filipino and Korean workers are opposed to lifting the exemption from Social Security and Medicare taxes among Filipino and Korean workers with CW status.

Some workers are worried that after 2014 or when their contract ends and they are sent home to their country of origin, they won’t see a single cent of the FICA taxes they paid to the U.S. government.

For a worker earning the CNMI’s minimum wage of $5.05 an hour, the monthly FICA tax deduction will be over $45 a month. Employee’s FICA contribution is 5.65 percent of their salary.

This deduction consists of 4.2 percent for Social Security, and 1.45 percent for Medicare. This is also on top of the CNMI taxes that foreign workers pay.

Haidee V. Eugenio | Reporter
Haidee V. Eugenio has covered politics, immigration, business and a host of other news beats as a longtime journalist in the CNMI, and is a recipient of professional awards and commendations, including the U.S. Environmental Protection Agency’s environmental achievement award for her environmental reporting. She is a graduate of the University of the Philippines Diliman.

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