NRAs may request additional withholding on line 6 of Form W-4, but are not required to do so.
An alien is an individual who is not a U.S. citizen. U.S. citizens include persons born in Puerto Rico, Guam, the U.S. Virgin Islands, and the Northern Mariana Islands. An alien is classified as either “resident” or “nonresident.”
A resident alien is not a U.S. citizen, and:
is a permanent resident of the U.S. (meets the green card test), and/or
passes the substantial presence test.
A nonresident alien (NRA) is not a U.S. citizen, and:
is not a permanent resident of the U.S. (does not meet the green card test), and
does not pass the substantial presence test.
The green card test: Resident aliens have been lawful, permanent residents of the U.S. at any time during the calendar year. Generally, an individual achieves this status if U.S. Citizenship and Immigration Services issued an alien registration card, also known as a green card.
The substantial presence test: This test calculates how many days an individual has been in the U.S. in a three-year period, including the current year and the two preceding years. An individual is considered a resident for tax purposes if he is physically present in the U.S. for at least:
31 days during the current year, and
183 days during the three-year period that includes the current year and the two years immediately preceding, counting:
all the days he was present in the current year
one-third of the days he was present in the first year before the current year, and
one-sixth of the days he was present in the second year before the current year.
Aliens lawfully admitted to the U.S. for permanent residence can apply for a social security card by completing and filing Form SS-5, Application for a Social Security Card, with the Social Security Administration. It takes about two weeks to get a social security card.
Aliens who are not eligible to obtain a social security number must get an Individual Taxpayer Identification Number. To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. It takes four to six weeks to get an ITIN.
An ITIN should not be accepted in place of a social security number for employee identification at work. An ITIN is only available to resident and nonresident aliens who are not eligible for U.S. employment and need identification for other tax purposes. You can identify an ITIN because it is a 9-digit number, beginning with the number “9” with either a “7” or “8” as the fourth digit and is formatted like a social security number (9NN-7N-NNNN).
An individual with an ITIN who later becomes eligible to work in the United States must obtain a social security number.
At time of hire, an employee must:
complete Form I-9, Employment Eligibility Verification, and
present proof of employment eligibility and identity (for example, passport or social security card, and driver's license).
Employers must keep Form I-9 for three years after the date of hire or for one year after employment is terminated, whichever is later. The form should be kept in a separate file from the employee’s personnel file.
An employer cannot continue to employ an individual who cannot present documentation that meets Form I-9 requirements, nor can an employer knowingly employ an individual not authorized to work in the U.S.
Resident aliens complete Form W-4, Employee’s Withholding Allowance Certificate, in the same manner as U.S. citizens. Nonresident aliens:
cannot claim exemption from withholding on Form W-4
must write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4
may only claim a “single” marital status on Form W-4, regardless of actual marital status, and
may only claim 0 or 1 allowance on Form W-4. Residents of Canada, Mexico, or South Korea are allowed to claim more than 1 exemption.
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NRAs may request additional withholding on line 6 of Form W-4, but are not required to do so. |
Federal: An employer’s payroll tax obligations for resident and nonresident aliens can vary from employee to employee. Generally, wages paid to resident and nonresident aliens are subject to withholding at the same graduated federal income tax rates applicable to U.S. citizens, with some exceptions for nonresident aliens. Nonresident aliens have the following special rules applied to their wages:
Wages are annualized for affected employees.
$2,150 is added to the annualized wages.
Withholding allowances indicated on Form W-4 are subtracted (up to 1).
Withholding is calculated based on the single federal withholding tables.
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Step 2 only applies to the calculation of the withholding tax. The additional amount is not considered income or wages and is not reported on any employer or employee returns. |
Wages paid are reported on Forms 941 and W-2, and are withheld as directed on the employee’s Form W-4.
Tax treaties affect federal tax withholding for nonresident aliens in certain situations. To obtain additional information regarding tax treaties, refer to the following IRS publications:
FICA/FUTA: Wages paid to a resident or nonresident alien for services performed within the U.S. are generally subject to FICA and FUTA taxes, unless a Social Security Totalization Agreement applies.
Services performed in the U.S. by a nonresident alien issued an F, J, M, or Q visa may be exempt from FICA if the services are performed to carry out the purpose for which the alien was admitted into the U.S. To establish that an alien employee’s pay is not subject to FICA, the employer should request a certificate of coverage from the appropriate agency of the employee’s country of residence.
State Withholding/SUI: State tax regulations generally follow federal law, but check with your state to determine if any additional regulations apply.
Returns: No special depositing or payroll tax return rules apply to taxes paid for wages withheld for resident and nonresident alien employees. Employment taxes are reported on Forms 940 and 941 and are deposited with all regular employees’ taxes. Form W-2 must be given to all employees.
Refer to IRS Publication 519, U.S. Tax Guide for Aliens, available on the IRS Web site at www.irs.gov.
Check with your state for specific regulations.