The IRS has special withholding rules for non-residents. Whether you are a nonresident employee for tax purposes depends upon the results of the 183-day residency formula as determined by the International Tax Navigator using your immigration status/history and U.S. days. The goal of the new rules is to provide withholding on wages that more closely approximates your income tax liability. The new rules accomplish this with new Form W-4 rules and special payroll computations for withholding on wages. When completing Form W-4 under the new form rules, a nonresident employee must:
- Check only "Single" marital status on line 3 (regardless of actual marital status).
- Claim only one withholding allowance on line 5, unless a resident of Canada, Mexico, or South Korea, or a US National.
- Write "Nonresident Alien" or "NRA" above the dotted line on line 6.
- Do not claim "Exempt" withholding status on line 7.
Nonresident employees are not required to request an additional withholding amount, but they can choose to have an additional amount withheld on line 6.
Nonresident employees may be exempt from tax or the withholding of tax. Even if no tax treaty exists to exempt the NRA from withholding federal and state taxes, the NRA may still qualify for the FICA tax exemption. It is strongly recommended that the hiring department have the NRA complete a Foreign National Information Questionnaire and contact Payroll Services for a tax analysis. Payroll Services will see that all tax related forms are completed accurately and submitted to the correct international or governmental agency.