Any employer who hires aliens should comply with the following general procedures with respect to the reporting and withholding of federal income taxes: Identify all aliens (non-U.S. citizens) on the company's payroll. Divide the aliens into two groups: "resident aliens" and "nonresident aliens" as defined by Internal Revenue Code section 7701(b) or by a tax treaty. (Refer to Publication 519, U.S. Tax Guide for Aliens.) For withholding tax purposes, treat resident aliens the same as U.S. citizens. For withholding tax purposes, treat nonresident aliens according to the following special withholding rules that apply to nonresidents as described in more detail in IRS Publication 15, (Circular E), Employer’s Tax Guide, Publication 15-T, Federal Income Tax Withholding Methods, and Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities: A nonresident alien should follow the special instructions in Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, to complete Form W-4, Employee’s Withholding Certificate, see Withholding certificate and exemption for nonresident employees. A nonresident alien is required to write "Nonresident Alien" or "NRA" in the space below Step 4(c) on Form W-4, see Withholding certificate and exemption for nonresident employees. A nonresident alien cannot write "EXEMPT" in the space below Step 4(c) on Form W-4, see Withholding certificate and exemption for nonresident employees. A nonresident alien may check "SINGLE or Married filing separately" on Step 1(c) on Form W-4, regardless of their actual marital status. For tax years beginning after December 31, 2017, and before January 1, 2026, taxpayers (including resident aliens and nonresident aliens) cannot claim a personal exemption deduction for themselves, their spouses, or their dependents. Refer to Aliens - repeal of personal exemptions. A nonresident alien may not claim the child tax credit or credit for other dependents in Step 3 of Form W-4, see Withholding certificate and exemption for nonresident employees (if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student from India, or a business apprentice from India, he or she may claim, under certain circumstances (see Publication 519, U.S. Tax Guide for Aliens), the child tax credit or credit for other dependents). For wages paid on or after January 1, 2006, you are required to apply a special procedure in calculating the amount of federal income tax withholding on the wages of nonresident alien employees. Refer to Publication 15, (Circular E), Employer's Tax Guide. Some nonresident aliens are eligible for exemptions from federal income tax withholding on wages because of tax treaties. These individuals should file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent Personal Services of a Nonresident Alien Individual, with the payroll office to claim such tax treaty exemptions. A payroll office withholding agent that receives Form 8233 from a nonresident alien individual claiming a tax treaty exemption must review the form, sign to indicate its acceptance, and forward the form to the IRS within 5 days of its acceptance. Nonresident aliens who refuse to file a proper Form W-4, Employee's Withholding Certificate as required by IRS regulations shall have federal income taxes withheld at the rates pertaining to single status with no withholding adjustments (Cf. Treasury Regulations section 31.3402(f)(2)-1(a)(4)). Payroll offices must report wages paid to a nonresident alien which are exempt under a tax treaty on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. Any additional wages paid to a nonresident alien over and above the exempt amount are reported on Form W-2, Wage and Tax Statement, in the normal manner. Even in situations in which all of a nonresident alien's wages are exempt from federal income tax under an income tax treaty, and in which all his federal wages would be reported on Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, the filing of a Form W-2, Wage and Tax Statement for such alien is usually also required in order to report state and local wage amounts and state and local income taxes withheld on such alien's wages. There are different withholding procedures for supplemental wages (i.e., payments to an employee that are not regular wages). See Publication 15, (Circular E), Employer's Tax Guide, Section 7. Exceptions to mandatory withholding of federal income tax on nonresident aliens: IRC sections 861(a)(3) and IRC 864(b)(1) - Wages or nonemployee compensation are exempt from federal income tax, and federal income tax withholding, if all 3 of the following conditions met: The nonresident alien is temporarily present in the U.S. for a period or periods not exceeding a total of 90 days during the taxable year, The compensation for such services does not exceed $3,000; and The nonresident alien performs the services as an employee of, or under contract with, a nonresident alien individual, a foreign corporation, or a foreign partnership not engaged in a trade or business in the U.S. or the foreign office of a U.S. citizen or resident alien individual, a U.S. corporation, or a U.S. partnership (including from within a U.S. possession). IRC section 872(b)(3) - Wages or nonemployee compensation are exempt from federal income tax, and federal income tax withholding, if both the following 2 conditions are met: The nonresident alien is present in the U.S. in F, J, M, or Q nonimmigrant status; and The compensation for services is paid by a nonresident alien individual, a foreign corporation, or a foreign partnership or the foreign office of a U.S. citizen or resident alien individual, a U.S. corporation, or a U.S. partnership (including from within a U.S. possession). References/Related topics Foreign Students and Scholars Withholding certificate and exemption for nonresident employees IRC Section 3402 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 cases filed on or after May 1, 1986, visit the Opinions Search page of the United States Tax Court.
