Tax Residency Substantial Presence Test Non-resident alien for tax purposes Special taxation rules Resident alien for tax purposes Taxes withheld same U.S. citizens

Substantial Presence Test Green card Test Permanent Resident anytime during tax year Time test 31 days during current year and 183 day formula All days of current year 1/3 days of previous year 1/6 days of second previous year Do not count exempt days Rules specify which days count as a day

W-4 Generally limited to Single 1 or 0 Pay is grossed-up before withholding is determined Monthly $ 187.50 Biweekly $86.50 Weekly $43.30 Line 6 write “nonresident alien” or NRA Line 7 cannot claim exempt IRS Notice 1392 for instructions

Social Security and Medicare Taxes Most nonresident and resident aliens subject Special Rules apply to F, M, J, or Q visitors Mostly teachers, researchers, and students Exempt as long as they remain nonresident alien for tax purposes Dependents do not receive exemption Totalization Agreements Bilateral agreements when paying similar taxes to home country Taxes withheld in error Employer should refund to collect ER FICA Form 843 can be submitted by individual if employer does not refund

Tax Treaties Bilateral agreements between nations Most for specific income types Reduce or eliminate taxes Lower withholding percentages Exempt income up to an annual salary cap Time limitations Residency/ physical presence limitations Retroactive/ prospective loss Reported on From 8233 or W8 (multiple versions)

Tax Reporting of Wages W-2 1042-S Most wages for resident and nonresident aliens reported on Form W-2 1042-S Payments to be included on 1042-S Treaty exempt income Non-wage payments Scholarship and fellowship Independent Contractor, Royalties, Other Income Gambling winnings

Nonresident Taxation Subject to taxes on U.S. source income only Services performed outside U.S. are foreign sourced income Some earnings sourced at payer Royalties Scholarships and fellowships Special rules for educational activities outside the U.S. Prizes awards Special rules for certain prizes/awards Short term visitors special rule U.S. earned income can be considered foreign sources if these criteria apply: In the U.S. for less than 90 days Income is less than $3000

1042-S and 1042 Form 1042-S Issued to individuals by March 15th of following year Good idea to issue closer to W-2s Filed for individuals and businesses Form 1042 Filed by March 15th of the following year Similar rules to paper/electronic submission as SSA

Immigration Status Individual must have proper status to work in U.S. Authorized by specific school or employer H-1B, O-1, E-3 F-1, J-1, M-1, Q-1 Some statuses require Employment Authorization Card Dependent visas F-1 OPT Not authorized to work B-1/B-2 (can be independent contractors in some circumstances) ESTA (can be independent contractors in some circumstances)

Nonresident Resources IRS IRS Publication 515 – Withholding of Tax on Nonresident Aliens and Foreign Entities IRS Publication 901 – U.S. Tax Treaties Form W-4 Notice 1392 M-274- I-9 Handbook for Employers breaks Rules for visas/work authorization Two major software providers Thompson Reuters Artic International