A nonresident alien
is an individual who
- is not a U.S. citizen and
- does not hold an Alien Registration Card
(commonly called a green card) and
- has not met the substantial presence test.
The Immigration and Naturalization Service
(INS) issues green cards to aliens who have petitioned for
residence status. When an alien receives a green card, he/she
has obtained the privilege of residing permanently in the
U.S. and is now considered a resident alien.
A resident alien
has all the privileges of a U.S. citizen with two exceptions:
- A resident alien does not have the privilege
to vote.
- A resident alien is not permitted to serve
on jury.
For tax purposes a resident alien is viewed
the same as a U.S. citizen.
The substantial presence
test is a calculation of the number of days an individual
is physically present in the U.S. over a period of three
calendar years, taking into consideration:
- all of the days physically present in the
U.S. during the current calendar year,
- one-third of all of the days physically
present in the U.S. during the first preceding calendar
year, and
- one-sixth of all the days physically present
in the U.S. during the second preceding calendar year.
The results of the calculation determine whether
the individual will be treated as a resident alien or a
nonresident alien for tax purposes. If the result of the
substantial presence test equals 183 days or more, the individual
will be treated as a resident alien for tax purposes; if
the result of the substantial presence test is less than
183 days, the individual will be treated as a nonresident
alien for tax purposes.
An alien meets the
substantial presence test after being present in the U.S.
for 183 days over a three-year period. The three-year period
must include the current year and the two years immediately
preceding. Any period during which an alien is in exempt
status does not count toward the accumulation of 183 days.
Exempt status most commonly seen in a university environment
would be students or teachers present in the U.S. on an
"F", "J", "M", or "Q"
visa.
Departmental personnel who propose to employ
a nonresident alien must determine if the NRA has a U.S.
Social Security number and a visa type that permits employment.
NRA employees must have a U.S. Social Security number before
their tax documents can be filed with the IRS and their
employment data entered into the UNCW payroll system for
payment.
If the NRA does not have a U.S. Social
Security number, he/she should go to the local
Social Security Office and complete a Form SS-5 (Application
for a Social Security Card). It will be necessary that the
NRA have documentation to indicate that he/she will be employed
at the university. This documentation is usually in
the form of a letter from the employing department. We
suggest that the NRA contact the International Programs
Office to assist with questions and proper documentation,
before going to the Social Security Office.
To strengthen homeland security in the aftermath
of September 11, Social Security has taken extra steps to
ensure the integrity of Social Security numbers. The changes
to the way that Social Security assigns numbers and issues
cards may cause a delay of several weeks or months in receiving
a number.
A visa is a stamp on a page in the passport
of an alien. The visa allows the passport bearer permission
to apply for entry into the U.S. under the conditions specified
by the visa type, which the bearer holds.
A visa can be obtained by making a personal
appearance before the consular officer assigned to the applicant's
consular district. The applicant must complete Form OF-156
(Application for Non-Immigrant visa). A consular officer
may ask for additional information to verify that the applicant
is eligible for the non-immigrant visa for which he/she
is applying.
Examples of information
contained on the visa stamp are as follows:
- Visa Number
- Visa Type
- Issue Date
- Expiration Date
- Location of the Issuing Office
With few exceptions,
all aliens entering the country receive an I-94 (Arrival/Departure
Record). The INS keeps the arrival portion. The departure
portion is stapled to the passport. The I-94 form
shows the visa classification, the date of entry, and the
length of the stay authorized.
When nonresident aliens are approved for employment,
the employee must schedule an appointment with the
Payroll Manager, 910-962-7255. The purpose of this meeting
is to review the NRA's tax status and to finalize the completion
of required tax documents.
Since most of the tax documents are completed
and filed for a specific calendar year, all NRA employees
are requested to schedule an appointment with the Payroll
Manager each year, in December. The purpose for this meeting
is to review any changes in the tax status of the employee
and to complete tax forms necessary for the new calendar
year.
NRA employees may be exempt from Social Security and Medicare
taxes (FICA tax) for a specific time period depending upon
the visa type used to enter the United States. The status
of this FICA tax exemption will be determined after meeting
with the Payroll Manager.
Wages paid to foreign employees are subject
to federal and state income tax unless exempted by special
IRS regulations or a tax treaty between the United States
and the specific resident country of the employee. When
the NRA meets with the Payroll Manager at the time of employment
or in December each year, an analysis will be made to determine
his/her tax status and if any tax treaty benefits are applicable.
At that time, required tax forms and documents will be completed,
signed, and filed with the appropriate tax offices.
The NRA should bring the following documents
to the scheduled appointment with the Payroll Manager:
- US Social Security Card
- Passport
- I-94 (Departure Record)
- Visa
- I-20 (Certificate of Eligibility for Nonimmigrant
[F-1] Student), or
DS-2019 (Certificate of Eligibility for Exchange Visitor
[J-1] Status)
- Letter of appointment from the department
or Graduate School
After the end of the calendar year, the Payroll
Department will issue the below forms to the NRA, which
will report the amount of compensation paid and taxes withheld:
- Form W-2 (Wage and Tax Statement), if applicable,
and/or
- Form 1042-S (Foreign Person's U.S. Source
Income Subject to Withholding)
Following the end of the calendar year, Student
Accounts will issue to the NRA a Form 1042-S, which will
report the taxable portion of a scholarship, fellowship
or grant and any tax withheld.
Note: If
the NRA is from a country that does not have a tax treaty
with the United States,
- Compensation will be subject to the graduated
withholding rates and the tax calculated based on his/her
Form W-4 and Form NC-4. UNCW will send the withheld tax
to the IRS and the North Carolina Department of Revenue.
- The NRA should complete a Form 1040-NR
(U.S. Nonresident Alien Income Tax Return) and a NC Form
D-400 (Individual Income Tax Return) at year-end. The
Form 1040-NR and Form D-400 will determine if the NRA
owes additional tax or is entitled to a refund of previously
withheld tax.
The Treasury and State Department negotiate
tax treaties between the United States and foreign countries.
Both the President and the Senate must approve a treaty.
One main purpose of a treaty is to prevent international
double taxation. International double taxation occurs
when more than one country taxes the same income. Income
tax treaties prevent double taxation by allowing a particular
type of income to be taxed by either of the countries involved
in the treaty.
Not all countries have a tax treaty with the
United States. A nonresident alien who is an employee from
a country without a tax treaty is subject to the employee
graduated tax withholding tables. The tax withholding is
calculated based on an employee's Form W-4 and Form NC-4.
See Special Instructions for Nonresident Aliens (Form
W-4 and Form NC-4) in the forms section of this guide.
Each treaty the United States negotiates with
a country is unique unto itself. Therefore, a general statement
cannot be made that a specific type of income is exempt
for all nonresident aliens on campus. If a nonresident alien
is eligible to receive income from the university, his/her
country of residence must first be determined. Then a review
of the tax treaty for that country can be made to determine
if the type of income in question is exempt. If the income
is exempt from withholding due to a tax treaty, the nonresident
alien must complete a Form 8233 to apply for the exemption
from withholding.
If the NRA’s country has an existing treaty with
the United States he/she may be exempt form tax withholding
on any income earned. The Payroll Office will assist
the nonresident alien with the completion of Form 8233
to apply for a treaty exemption from this tax withholding. Once
the University completes the agency part of this form,
the Payroll Manager must forward the form to the Internal
Revenue Service, International Returns Section, Bensalem,
PA. The exemption does not become effective until ten days
after the Form 8233 is mailed to the IRS.
The University cannot issue a check to the
alien until the 10-day waiting period has expired. To issue
the check before the expiration of the waiting period, the
mandatory 30% will be withheld and sent to the IRS. To recover
the withheld taxes, the alien must file a U.S. income tax
return.
- FORM
SS-5 - Application for a Social Security Card
- FORM
W-7 - Application for IRS Individual Taxpayer
Identification Number
- FORM
8233 – Exemption from Withholding on Compensation
for Independent (and Certain Dependent) Personal Services
of a Nonresident Alien Individual
- INSTRUCTIONS
for FORM 8233
- FORM
W-4 – Employee’s Federal Withholding
Allowance Certificate
- FORM
NC-4 – Employee’s NC Withholding Allowance
Certificate
- SPECIAL
INSTRUCTIONS for Nonresident Aliens (Form W-4
and NC-4)
Foreign students, faculty, and staff with
tax questions or problems are advised to seek assistance
from the IRS, a CPA, or attorney. In the U. S., the individual
taxpayer is responsible for filing an appropriate and accurate
tax return and negotiating all tax matters with the IRS.
Taxpayer assistance is available from your local IRS office
or by calling the IRS toll free taxpayer assistance number,
1-800-829-1040.
