1040.30 Tax Withholding for Nonresident Aliens

For a nonresident student employee, the Student Employment Work authorization must be completed for all positions an international student has on campus

• International Students cannot exceed 20 hours of work per week during the academic year

Nonresidents are required to complete Form I-9 to confirm eligibility to work in the US.

Reference:  How to Complete Form I-9 with Examples

Nonresidents are required to have a Social Security Number or proof that they have applied for one and will provide it to Payroll/HR once they have received their Social Security Card.

Nonresidents are required to complete a Foreign National Information Form per Administrative Practice Letter:  http://www.maine.edu/about-the-system/system-office/finances/administrative-practice-letters/ SECTION IX – Student Financial E. Payments to Nonresident Aliens

Required Documentation for Foreign National Information Form

Residents of certain countries may be eligible to claim a tax treaty to exempt all, or part, of their wages from U.S. federal income tax withholding. Maine also honors federal tax treaties. Tax treaties for F-1 and J-1 students generally exempt a limited amount of wages, from $2000-$5000, from federal income tax. Tax treaties for J-1 researchers generally exempt all wages from federal income tax. A Social Security Number is required to claim the tax treaty benefit. If applicable, Nonresidents may complete a Form 8233 Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual to claim tax treaty benefits (exempt from federal withholding taxes).  Form 8233 Instructions.

Visit 1040.35 UMS Tax Treaties for details.

Non-US citizens are considered a Nonresident Alien unless and until they pass the Substantial Presence Test at which time, their status changes to a Resident Alien.  Resident Aliens are taxed similarly to US citizens.  Visit this IRS site for additional information:  https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

Resources:

• Determining an Individual’s Tax Residency Status | Internal Revenue Service (irs.gov)

• Tax Residency Status Examples | Internal Revenue Service (irs.gov)

• Foreign Student Liability for Social Security and Medicare Taxes | Internal Revenue Service (irs.gov)
• Exempt Individual - Who is a Student | Internal Revenue Service (irs.gov)
• Exempt Individuals: Teachers and Trainees | Internal Revenue Service (irs.gov)

Description: When employees are first hired, the default tax withholding status is Single with no adjustments for both Federal and Maine tax withholding. Nonresident alien employees should follow these steps to update tax withholding status per IRS guidelines.  For more information related to the special Form W-4 instructions for nonresident alien employees, including exceptions, refer to Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens.  Visit 1040.35 UMS Tax Treaties for additional related information. 

UMS is required to add an amount to the nonresident alien's wages solely for calculating the income tax withholding for each payroll period. The amount to be added to the nonresident alien´s wages to calculate income tax withholding is as follows:

Note. Nonresident alien students from India and business apprentices from India are not subject to this procedure.

When completing IRS Federal Form W-4, nonresident aliens are required to:

• Not claim exemption from income tax withholding; 
• Request withholding as if  single, regardless of actual filing status; 
• Not claim the child tax credit or credit for other dependents in Step 3 of Form W-4 (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 Notice 1392), the child tax credit or credit for other dependents); and 
• Write “Nonresident Alien” or “NRA” in the space below Step 4(c) of Form W-4. 

When completing State of Maine Form W-4-ME, nonresident aliens are required to:

• Not claim exemption from income tax withholding; 
• Request withholding as if single, regardless of actual filing status

Non-resident aliens on F-1 and J-1 visas are exempt from paying FICA (Social Security and Medicare) taxes until they become residents for tax purposes. F-1 and J-1 students generally maintain non-resident status for their first 5 calendar years in the U.S. Students also fall under the student FICA exemption, so generally students do not pay FICA taxes even after they become residents for tax purposes. J-1 researchers generally maintain non-resident status for their first 2 calendar years in the U.S. On January 1 of the third calendar year of presence, they begin to pay FICA taxes. All other non-residents, including H-1B, J-2 and TN visa-holders, are subject to FICA taxes from their first day of employment. Non-resident alien employees must complete the Foreign National Information Form in order to determine the appropriate FICA status.

Wages for non-resident alien employees are reported on a W-2 statement at year end. Non-resident aliens who have claimed a tax treaty will receive a 1042-S form, which may be in addition to the W-2 statement. Form 1042-S Foreign Persons U.S. Source Income - Employee wages that are exempt from federal and state income taxes due to a tax treaty will be reported on Form 1042-S.  More information may be found in University of Maine System's Administrative Practice Letter #43 Payments to Nonresident Aliens.

Non-resident alien employees working for the University while physically present outside the U.S. cannot be paid via UMS payroll due to the complex tax withholding and reporting rules. Such workers must be paid using a third-party global payroll processor with that third party making the appropriate tax withholding and social security payments in connection with the wages paid.