Withholding Exemptions - Personal Exemptions - Form W-4
The amount of wages subject to graduated withholding may be reduced by the personal exemption amount. The personal exemptions allowed in figuring wages subject to graduated withholding are the same as those discussed under Figuring Your Tax, except that an employee must claim them on Form W-4 (PDF). Refer to Publication 505, Tax Withholding and Estimated Tax, for the current personal exemption amount.
Special Instructions for Form W-4 For Nonresident Alien Employees
A nonresident alien subject to wage withholding must give the employer a completed Form W-4 to enable the employer to figure how much income tax to withhold. In completing the form, nonresident aliens should use the following instructions instead of the instructions on Form W-4.
For Forms W-4 completed after December 31, 2005:
- Check only "Single" marital status on line 3 (regardless of actual marital status).
- Claim only one withholding allowance on line 5, unless you are a resident of Canada, Mexico, South Korea, a U.S. national, or a student or business apprentice from India.
- Do not claim “Exempt” withholding status on line 7.
- Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4.
For wages paid on or after January 1, 2006, you are required to apply the following procedure in calculating the amount of federal income tax withholding on the wages of nonresident alien employees. Under this procedure, you add an amount as set forth in the chart below to the nonresident alien's wages solely for calculating the income tax withholding for each payroll period. You determine the amount to be withheld by applying the income tax withholding tables to the amount of wages paid plus the additional chart amount. For more information, see Notice 2005-76.
The amount to be added to the nonresident alien´s wages to calculate income tax withholding is set forth in Chapter 9 of Publication 15.
Note. Nonresident alien students from India and business apprentices from India are not subject to this procedure.
The amounts added under the chart in Chapter 9 of Publication 15 are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. These chart amounts should not be included in any box on the employee's Form W-2 and do not increase the income tax liability of the employee. Also, these chart amounts do not increase the social security, Medicare, or FUTA tax liability of the employer or the employee. This procedure only applies to nonresident alien employees who have wages subject to income tax withholding.
For wages paid after December 31, 2005 the employer should solicit a new Form W-4 from his nonresident alien employees which reflects the new procedures shown above.
If an NRA employee neglects or refuses to file a new Form W-4, then continue to withhold federal income tax on the NRA’s wages using the old NRA withholding procedures in effect for wages paid prior to January 1, 2006 if the old Form W-4 is still a valid Form W-4.
A Form W-4 remains in effect until the employee gives you a new one. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4.
Beginning with wages paid on or after January 1, 2010, employers are required to calculate income tax withholding by making two modifications:
- First, employers need to add an amount to wages before determining withholding under the wage bracket or percentage method in order to offset the standard deduction built into the withholding tables.
- Second, employers need to determine an additional amount of withholding from a separate table applicable only to nonresident alien employees to offset the effect of the Making Work Pay Tax Credit built into the withholding tables.
The specific steps to be followed for each of these two modifications will be set forth in Publication 15 and other IRS forms or publications.
Invalid Forms W-4. Any unauthorized change or addition to Form W-4 makes it invalid. This includes taking out any language by which the employee certifies that the form is correct. A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. An employee who submits a false Form W-4 may be subject to a $500 penalty.
When you get an invalid Form W-4, do not use it to figure federal income tax withholding. Tell the employee that it is invalid and ask for another one. If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before.
Students and Business Apprentices from India
A student or business apprentice who is eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty can claim an additional withholding allowance on line 5 for his or her spouse if the spouse has no U.S. source gross income and may not be claimed as a dependent by another taxpayer. In addition, he or she can claim an additional withholding allowance for each dependent (usually a child) who has become a resident alien if the dependent has met all 5 of the dependency tests as described in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Furthermore, he or she does not have to request the additional withholding amount on line 6 of Form W-4.
Notice 2005-76, 2005 IRB 468
Revenue Procedure 93-20 1993-1 C.B. 528
Treasury Regulation 31.3402 (f)(2)-1(e)
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.