If wages are treaty-exempt for income tax, can payroll still have to withhold FICA?
One of our advisers says a treaty may reduce or eliminate income-tax withholding on a founder's compensation, but our payroll provider is still talking about Social Security and Medicare taxes as though they are separate. That confused me because I had assumed treaty relief would simplify the whole payroll picture, not just one slice of it.
Before we finalize the compensation structure, I want to know whether it is normal for a wage payment to be treaty-sensitive for income tax but still potentially subject to FICA unless a different exception, such as totalization or another payroll rule, applies.
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