Once the workers obtain their CW-1 status, that’s when the FICA deduction starts, he added.
“We are having discussions with the [Internal Revenue Service] asking if they could issue a Q&A clarify the issue,” he said.
The Fitial administration said the imposition of the taxes is unfair on the part of the guest workers and is another burden on employers.
One guest worker said she is paid $5.05 an hour as a bookkeeper and gets to work for 80 hours in two weeks with no overtime.
She said their company started deducting the FICA taxes immediately after Nov. 28.
She said she earns about $404 gross income per pay period. Out of this pay, she gets deducted $16.97 for Social Security, $5.86 for Medicare and $16.16 for Chapter 2 tax.
With all these deductions, she gets $365 per pay day.
“I am trying to make ends meet as I am also sending a brother to college in the Philippines,” she said.
Asked if she agreed to having FICA deducted, she could only offer this reply, “I have no choice. It’s the law. But if I were to have my way, I would rather not.”
She explained, “There is no guarantee that I would be staying here in the CNMI in the next 10 years so I would be eligible to receive benefits. I don’t think we CW workers will be staying here beyond 2014.”
A Korean worker, 38, who has been in the CNMI for 15 years said: “FICA’s OK if we would be working here for at least 10 years. What will happen if my employer decides to close the business in two years? Will I be able to get my money back?”
Myra Tengco, who works at a restaurant, said her deductions were “big.”
“It would not have been a problem if we would be able to stay here long enough to make the minimum of 10 years in contributions to receive benefits,” she added.
Another worker said: “I have been here for 17 years. This FICA would have great if it happened when I first worked here. But what guarantee do I have that the federal government will give me back my contributions?”
Cherry, also a guest worker, said she gets paid $363.60 for working for 72 hours in two weeks.
Without FICA, she said she takes home about $348.48 in two weeks; with FICA, it’s $327.95.
She pays $100 for renting a small room in Garapan; $35 for utilities; $30 for gasoline/transportation; $40, food; $20, phone cards; and $15, laundry-related expenses.
For the first two weeks of the month, she said, “I am left with $108.”
Rhea, an accountant, said they started deducting FICA after Nov. 28.
She said, “From the employees’ point of view, they would like to wait for the official instructions from IRS.”
However, she said, her employers would like to “just follow what the law says.”
She said the employers would rather not incur penalty and assured them that they would be refunded should Filipinos get an exemption.
Osamu Taniguchi, who manages Casa Urashima Restaurant, said he has been in the CNMI for 19 years and had FICA deductions all those years.
“No choice,” he said.
He told Variety, “I get deducted about $145 a month.
Nepalese Baba Gurung has been in the CNMI for seven years. She said all these years she had never had FICA deductions.
“But my husband did get deductions,” said Gurung adding that her husband has been working on Saipan for 13 years now.
She also wondered, “How come the officials are only asking exemptions for Filipinos and Koreans? How about us Nepalese? Bangladeshis? Chinese? Thai?”
Where’s the money?
Chinese journalist Betty Bai considers the FICA as an investment.
But she said scores of Chinese garment workers who paid the taxes were not able to get back their contributions.
“Some were only here for two or three years. Do you think it is fair to these workers who were only temporary workers in the CNMI?” Bai asked.
She added, “The governor should help these workers get their contributions refunded. They have long gone back to China without getting their money back.”
In 2008, five of these temporary workers filed a complaint with the U.S. Court of Federal Claims and later consolidated it with the case filed by garment factory Hyunjin which sought a refund of FICA taxes paid by hundreds of workers.
Their complaint covered payment of taxes between 2004 and 2007.
Based on court filings, the plaintiffs — five garment workers and Hyunjin — claimed that FICA taxes were not applicable to wages received or paid by noncitizens and nonresidents relating to employment in the CNMI because the commonwealth was not considered part of the U.S.
The plaintiffs also contended that the Covenant proscribes FICA taxes from applying to nonresident workers in the CNMI.
The federal government argued that the CNMI is part of the U.S. through the Covenant; that §606(b) of the Covenant applies FICA excise tax on Hyunjin.
The U.S. government also reasoned that other sections of the Covenant subject the individual plaintiffs to FICA taxes.
