Table of Contents
- Introduction
- Topics - This chapter discusses:
- Useful Items - You may want to see:
- Notification of Alien Status
- Withholding From Compensation
- Withholding From Other Income
- Income Entitled to Tax Treaty Benefits
- Tax Withheld on Real Property Sales
- Social Security and Medicare Taxes
- Estimated Tax Form 1040-ES (NR)
This chapter discusses how to pay your U.S. income tax as you earn or receive income during the year. In general, the federal income tax is a pay as you go tax. There are two ways to pay as you go.
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Withholding. If you are an employee, your employer probably withholds income tax from your pay. Tax may also be withheld from certain other income—including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the U.S. Treasury in your name.
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Estimated tax. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. People who are in business for themselves generally will have to pay their tax this way. You may have to pay estimated tax if you receive income such as dividends, interest, rent, and royalties. Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.
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How to notify your employer of your alien status,
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Income subject to withholding of income tax,
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Exemptions from withholding,
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Social security and Medicare taxes, and
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Estimated tax rules.
Publication
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515 Withholding of Tax on Nonresident Aliens and Foreign Entities
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901 U.S. Tax Treaties
Form (and Instructions)
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W-4
Employee's Withholding Allowance Certificate -
W-8BEN
Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding -
W-8ECI
Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States -
W-9
Request for Taxpayer Identification Number and Certification -
1040-ES (NR)
U.S. Estimated Tax for Nonresident Alien Individuals -
8233
Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual -
8288-B
Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests
See chapter 12 for information about getting these publications and forms.
You must let your employer know whether you are a resident or a nonresident alien so your employer can withhold the correct amount of tax from your wages.
If you are a resident alien under the rules discussed in chapter 1, you must file Form W-9 or a similar statement with your employer. If you are a nonresident alien under those rules, you must furnish to your employer Form 8233 or Form W-8BEN, establishing that you are a foreign person, or Form W-4, establishing that your compensation is subject to graduated withholding at the same rates as resident aliens or U.S. citizens.
If you are a resident alien and you receive income other than wages (such as dividends and royalties) from sources within the United States, file Form W-9 or similar statement with the withholding agent (generally, the payer of the income) so the agent will not withhold tax on the income at the 30% (or lower treaty) rate. If you receive this type of income as a nonresident alien, file Form W-8BEN with the withholding agent so that the agent will withhold tax at the 30% (or lower treaty) rate. However, if the income is effectively connected with a U.S. trade or business, file Form W-8ECI instead.
The following discussion generally applies only to nonresident aliens. Tax is withheld from resident aliens in the same manner as U.S. citizens.
Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U.S. citizens. Therefore, your compensation, unless it is specifically excluded from the term “wages” by law, or is exempt from tax by treaty, is subject to graduated withholding.
If you are an employee and you receive wages subject to graduated withholding, you will be required to fill out a Form W-4. Also fill out Form W-4 for a scholarship or fellowship grant to the extent it represents payment for past, present, or future services and for which you are not claiming a tax treaty withholding exemption on Form 8233 (discussed later under Income Entitled to Tax Treaty Benefits). These are services you are required to perform as an employee and as a condition of receiving the scholarship or fellowship (or tuition reduction).
Nonresident aliens should fill out Form W-4 using the following instructions instead of the instructions on the Form W-4. This is because of the restrictions on a nonresident alien's filing status, the limited number of personal exemptions a nonresident alien is allowed, and because a nonresident alien cannot claim the standard deduction.
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Check only “Single” marital status on line 3 (regardless of your actual marital status).
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Claim only one allowance on line 5, unless you are a resident of Canada, Mexico, or the Republic of Korea (South Korea), or a U.S. national.
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Write “Nonresident Alien” or “NRA” on the dotted line on line 6. You can request additional withholding on line 6 at your option.
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Do not claim “Exempt” withholding status on line 7.
A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans, and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.
See Withholding on Scholarships and Fellowship Grants later, for how to fill out Form W-4 if you receive a U.S. source scholarship or fellowship grant that is not a payment for services.
Wages that are exempt from U.S. income tax under an income tax treaty are generally exempt from withholding. For information on how to claim this exemption from withholding, see Income Entitled to Tax Treaty Benefits, later.
Wages paid to aliens who are residents of Canada, Mexico, Puerto Rico, or the U.S. Virgin Islands may be exempt from withholding. The following paragraphs explain these exemptions.
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Perform duties in transportation service between the United States and Canada or Mexico, or
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Perform duties connected to the construction, maintenance, or operation of a waterway, viaduct, dam, or bridge crossed by, or crossing, the boundary between the United States and Canada or the boundary between the United States and Mexico.
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Is not a U.S. citizen or resident,
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Is a resident of Canada or Mexico, whichever applies, and
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Expects to perform duties previously described during the tax year in question.
If you receive a pension as a result of personal services performed in the United States, the pension income is subject to the 30% (or lower treaty) rate of withholding. You may, however, have tax withheld at graduated rates on the portion of the pension that arises from the performance of services in the United States after December 31, 1986. You must fill out Form W-8BEN and give it to the withholding agent or payer before the income is paid or credited to you.
Tips you receive during the year for services performed in the United States are subject to U.S. income tax. Include them in taxable income. In addition, tips received while working for one employer, amounting to $20 or more in a month, are subject to graduated withholding.
If there is no employee-employer relationship between you and the person for whom you perform services, your compensation is subject to the 30% (or lower treaty) rate of withholding. However, if you are engaged in a trade or business in the United States during the tax year, your compensation for personal services as an independent contractor (independent personal services) may be entirely or partly exempt from withholding if you reach an agreement with the Internal Revenue Service on the amount of withholding required. An agreement that you reach with the IRS regarding withholding from your compensation for independent personal services is effective for payments covered by the agreement after it is agreed to by all parties. You must agree to timely file an income tax return for the current tax year.
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A list of the names and addresses of the nonresident aliens to be covered by the agreement.
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Copies of all contracts that the aliens or their agents and representatives have entered into regarding the time period and performances or events to be covered by the agreement including, but not limited to, contracts with:
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Employers, agents, and promoters,
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Exhibition halls,
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Persons providing lodging, transportation, and advertising, and
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Accompanying personnel, such as band members or trainers.
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An itinerary of dates and locations of all events or performances scheduled during the period to be covered by the agreement.
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A proposed budget containing itemized estimates of all gross income and expenses for the period covered by the agreement, including any documents to support these estimates.
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The name, address, and telephone number of the person the IRS should contact if additional information or documentation is needed.
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The name, address, and employer identification number of the agent or agents who will be the central withholding agents for the aliens and who will enter into a contract with the IRS. A central withholding agent ordinarily receives contract payments, keeps books of account for the aliens covered by the agreement, and pays expenses (including tax liabilities) for the aliens during the period covered by the agreement.
Central Withholding Agreement Program
Internal Revenue Service
SE:S:C:CP:IIC MS 0175
1220 SW 3rd Ave.
Portland, OR 97204
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A statement by each withholding agent from whom you have received gross income effectively connected with a trade or business in the United States during the tax year, showing the amount of income paid and the tax withheld. Each statement must be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury.
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A statement by the withholding agent from whom you expect to receive the final payment of compensation, showing the amount of the payment and the amount of tax that would be withheld if a final payment exemption were not granted. This statement must also be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury.
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A statement by you that you do not intend to receive any other income effectively connected with a trade or business in the United States during the current tax year.
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The amount of tax that has been withheld or paid under any other provision of the Internal Revenue Code or regulations for any income effectively connected with your trade or business in the United States during the current tax year.
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The amount of your outstanding tax liabilities, if any, including interest and penalties, from the current tax year or prior tax periods.
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Any provision of an income tax treaty under which a partial or complete exemption from withholding may be claimed, the country of your residence, and a statement of sufficient facts to justify an exemption under the treaty.
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A statement signed by you, and verified by a declaration that it is made under penalties of perjury, that all the information given is true and that to your knowledge no relevant information has been omitted.
Withholding on payments for independent personal services is generally based on the amount of your compensation payment minus the value of one exemption ($3,500 for 2008).
To determine the income for independent personal services performed in the United States to which the 30% (or lower treaty) rate will apply, you are allowed one personal exemption if you are not a U.S. national and are not a resident of Canada, Mexico, or the Republic of Korea (South Korea). For purposes of 30% withholding, the exemption is prorated at $9.56 a day in 2008 for the period that labor or personal services are performed in the United States. To claim an exemption from withholding on the personal exemption amount, fill out the applicable parts of Form 8233 and give it to the withholding agent.
Example.
Eric Schmidt, who is a resident of Germany, worked under a contract with a U.S. firm (not as an employee) in the United States for 100 days during 2008 before returning to his country. He earned $6,000 for the services performed (not considered wages) in the United States. Eric is married and has three dependent children. His wife is not employed and has no income subject to U.S. tax. The amount of the personal exemption to be allowed against the income for his personal services performed within the United States in 2008 is $956 (100 days × $9.56), and withholding at 30% is applied against the balance. Thus, $1,513.20 in tax is withheld from Eric's earnings (30% of $5,044 ($6,000 - $956)).
Other income subject to 30% withholding generally includes fixed or determinable income such as interest (other than portfolio interest), dividends, pensions and annuities, and gains from certain sales and exchanges, discussed in chapter 4. It also includes 85% of social security benefits paid to nonresident aliens.
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A copy of Form SSA-1042S, Social Security Benefit Statement.
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A copy of the “green card.”
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A signed declaration that includes the following statements: The SSA should not have withheld income tax from my social security benefits because I am a U.S. lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. I am filing a U.S. income tax return for the tax year as a resident alien reporting all of my worldwide income. I have not claimed benefits for the tax year under an income tax treaty as the resident of a country other than the United States.
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Income (other than compensation) that is effectively connected with your U.S. trade or business.
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Income from real property that you choose to treat as effectively connected with a U.S. trade or business. See Income From Real Property in chapter 4 for details about this choice.
If you are a foreign partner in a U.S. or foreign partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. A partnership that is publicly traded will withhold tax on your actual distributions of effectively connected income. In this case the partnership will give you a statement on Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. The withholding rate on your share of effectively connected income is generally the highest rate of tax that applies to you (35% for 2008). However, the partnership may withhold at the highest rate that applies to a particular type of income allocable to you if you gave the partnership the appropriate documentation (generally, Form W-8BEN). Long-term capital gain is an example of a particular type of income to which a highest tax rate applies. Claim the tax withheld as a credit on your 2008 Form 1040NR.
There is no withholding on a qualified scholarship received by a candidate for a degree. See chapter 3.
If you are a nonresident alien student or grantee with an “F,” “J,” “M,” or “Q” visa and you receive a U.S. source grant or scholarship that is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax at 14% (or lower treaty rate) of the taxable part of the grant or scholarship that is not a payment for services. However, if you are not a candidate for a degree and the grant does not meet certain requirements, tax will be withheld at the 30% (or lower treaty) rate.
Any part of a scholarship or fellowship grant that is a payment for services is subject to graduated withholding as discussed earlier under Withholding on Wages.
Your withholding agent may choose to use an alternate procedure by asking you to fill out Form W-4 and the Personal Allowances Worksheet (attached to Form W-4). Use the following instructions instead of the Form W-4 instructions to complete the worksheet.
After the withholding agent has accepted your Form W-4, tax will be withheld on your scholarship or grant at the graduated rates that apply to wages. The gross amount of the income is reduced by the amount on line H of the worksheet and the withholding tax is figured on the remainder.
You will receive a Form 1042-S from the withholding agent (usually the payer of your grant) showing the gross amount of your taxable scholarship or fellowship grant less the withholding allowance amount, the tax rate, and the amount of tax withheld. Use this form to prepare your annual U.S. income tax return.
If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, tax for certain items of income, you should notify the payor of the income (the withholding agent) of your foreign status to claim a tax treaty withholding exemption. Generally, you do this by filing either Form W-8BEN or Form 8233 with the withholding agent.
File Form W-8BEN for income that is not personal services income. File Form 8233 for personal services income as discussed next.
Central Withholding Agreement Program
Internal Revenue Service
SE:S:C:CP:IIC MS 0175
1220 SW 3rd Ave.
Portland, OR 97204
You will be required to pay U.S. tax, at the time of your departure from the United States, on any income for which you incorrectly claimed a treaty exemption. For more details on treaty provisions that apply to compensation, see Publication 901.
If you are a nonresident alien and you dispose of a U.S. real property interest, the transferee (buyer) of the property generally must withhold a tax equal to 10% of the amount realized on the disposition.
A distribution by a qualified investment entity to a nonresident alien shareholder that is treated as gain from the sale or exchange of a U.S. real property interest by the shareholder is subject to withholding at 35%. Withholding is also required on certain distributions and other transactions by domestic or foreign corporations, partnerships, trusts, and estates. These rules are covered in Publication 515.
For information on the tax treatment of dispositions of U.S. real property interests, see Real Property Gain or Loss in chapter 4.
If you are a partner in a domestic partnership, and the partnership disposes of a U.S. real property interest at a gain, the partnership will withhold tax on the amount of gain allocable to its foreign partners. Your share of the income and tax withheld will be reported to you on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding (in the case of a publicly traded partnership).
Withholding is not required in the following situations.
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The property is acquired by the buyer for use as a residence and the amount realized (sales price) is not more than $300,000.
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The property disposed of is an interest in a U.S. corporation if any class of stock of the corporation is regularly traded on an established securities market.
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The property disposed of is an interest in a U.S. corporation that is not regularly traded on an established market and you (the seller) give the buyer a copy of a statement issued by the corporation certifying that the interest is not a U.S. real property interest.
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You (the seller) give the buyer a certification stating, under penalties of perjury, that you are not a foreign person, and containing your name, U.S. taxpayer identification number, and home address.
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The buyer receives a withholding certificate from the Internal Revenue Service.
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You give the buyer written notice that you are not required to recognize any gain or loss on the transfer because of a nonrecognition provision in the Internal Revenue Code or a provision in a U.S. tax treaty. The buyer must file a copy of the notice with the Ogden Service Center, P.O. Box 409101, Ogden, UT 84409. You must verify the notice as true and sign it under penalties of perjury. The notice must contain the following information.
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A statement that the notice is a notice of nonrecognition under regulation section 1.1445-2(d)(2).
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Your name, taxpayer identification number, and home address.
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A statement that you are not required to recognize any gain or loss on the transfer.
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A brief description of the transfer.
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A brief summary of the law and facts supporting your claim that recognition of gain or loss is not required.
You may not give the buyer a written notice for any of the following transfers: the sale of your main home on which you exclude gain, a like-kind exchange that does not qualify for nonrecognition treatment in its entirety, or a deferred like-kind exchange that has not been completed at the time the buyer must file Form 8288. Instead, a withholding certificate (described next) must be obtained.
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The amount you realize on the transfer of a U.S. real property interest is zero.
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The property is acquired by the United States, a U.S. state or possession, a political subdivision, or the District of Columbia.
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A distribution from a domestically controlled qualified investment entity that is treated as a distribution of a U.S. real property interest only because an interest in the entity was disposed of in an applicable wash sale transaction. See Wash sale under Real Property Gain or Loss in chapter 4.
The certifications in (3) and (4) must be disregarded by the buyer if the buyer has actual knowledge, or receives notice from a seller's or buyer's agent, that they are false.
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The IRS determines that reduced withholding is appropriate because either:
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The amount required to be withheld would be more than your maximum tax liability, or
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Withholding of the reduced amount would not jeopardize collection of the tax.
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All of your realized gain is exempt from U.S. tax.
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You or the buyer enter into an agreement for the payment of tax providing security for the tax liability.
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Your name and TIN.
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The buyer's name, address, and TIN.
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A description and location of the property.
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The date of the transfer.
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The amount realized on the transfer.
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The amount of tax withheld.
If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. Your payments of these taxes contribute to your coverage under the U.S. social security system. Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance (Medicare) benefits to individuals who meet certain eligibility requirements.
In most cases, the first $97,500 of taxable wages received in 2007 for services performed in the United States is subject to social security tax. All taxable wages are subject to Medicare tax. Your employer deducts these taxes from each wage payment. Your employer must deduct these taxes even if you do not expect to qualify for social security or Medicare benefits. You can claim a credit for excess social security tax on your income tax return if you have more than one employer and the amount deducted from your combined wages for 2007 is more than $6,045. Use the appropriate worksheet in chapter 3 of Publication 505, Tax Withholding and Estimated Tax, to figure your credit.
If any one employer deducted more than $6,045, you cannot claim a credit for that amount. Ask your employer to refund the excess.
In general, U.S. social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. In limited situations, these taxes apply to wages for services performed outside the United States. Your employer should be able to tell you if social security and Medicare taxes apply to your wages. You cannot make voluntary payments if no taxes are due.
Generally, services performed by you as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if the services are performed to carry out the purpose for which you were admitted to the United States. This means that there will be no withholding of social security or Medicare taxes from the pay you receive for these services. These types of services are very limited, and generally include only on-campus work, practical training, and economic hardship employment.
Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien as discussed in chapter 1, even though your nonimmigrant classification (“F,” “J,” “M,” or “Q”) remains the same.
Services performed by a spouse or minor child of nonimmigrant aliens with the classification of “F-2,” “J-2,” “M-2,” and “Q-3” are covered under social security.
If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or salary or to engage in business while you are in the United States. In some cases, a student admitted to the United States in “F-1,” “M-1,” or “J-1” status is granted permission to work. Social security and Medicare taxes are not withheld from pay for the work unless the student is considered a resident alien.
Any student who is enrolled and regularly attending classes at a school may be exempt from social security and Medicare taxes on pay for services performed for that school.
The U.S. Citizenship and Immigration Services (USCIS) permits on-campus work for students in “F-1” status if it does not displace a U.S. resident. On-campus work means work performed on the school's premises. On-campus work includes work performed at an off-campus location that is educationally affiliated with the school. On-campus work under the terms of a scholarship, fellowship, or assistantship is considered part of the academic program of a student taking a full course of study and is permitted by the USCIS. Social security and Medicare taxes are not withheld from pay for this work unless the student is considered a resident alien.
Students in “F-1” status may be permitted to participate in a curricular practical training program that is an integral part of an established curriculum. Curricular practical training includes work/study programs, internships, and cooperative education programs. In this case, the educational institution endorses the Form I-20. Social security and Medicare taxes are not withheld from pay for this work unless the student is considered a resident alien.
Employment due to severe economic necessity and for optional practical training is sometimes permitted for students in “F-1” status. Students granted permission to work due to severe economic necessity or for optional practical training will be issued Form I-688B or Form I-766 by the USCIS. Social security and Medicare taxes are not withheld from pay for this work unless the student is considered a resident alien.
Students in “M-1” status who have completed a course of study can accept employment for practical training for up to 6 months and must have a Form I-688B or Form I-766 issued by the USCIS. Social security and Medicare taxes are not withheld from “M-1” students' pay for these services unless the student is considered a resident alien.
In all other cases, any services performed by a nonresident alien student are not considered as performed to carry out the purpose for which the student was admitted to the United States. Social security and Medicare taxes will be withheld from pay for the services unless the pay is exempt under the Internal Revenue Code.
Nonresident aliens are temporarily admitted to the United States as nonimmigrant exchange visitors under section 101(a)(15)(J) of the Immigration and Nationality Act through the sponsorship of approved organizations and institutions that are responsible for establishing a program for the exchange visitor and for any later modification of that program. Generally, an exchange visitor who has the permission of the sponsor can work for the same reasons as the students discussed above. In these cases, permission is granted by a letter from the exchange visitor's sponsor or by endorsement from the program sponsor on Form DS-2019, Certificate of Eligibility.
Social security and Medicare taxes are not withheld on pay for services of an exchange visitor who has been given permission to work and who possesses or obtains a letter of authorization from the sponsor unless the exchange visitor is considered a resident alien.
In all other cases, services performed by an exchange visitor are not considered as performed to carry out the purpose for which the visitor was admitted to the United States. Social security and Medicare taxes are withheld from pay for the services unless the pay is exempt under the Internal Revenue Code.
If you are a “J-1” visa holder, your spouse or child may be permitted to work in the United States with the prior approval of the USCIS and issuance of Form I-688B or Form I-766.
Nonresident aliens temporarily admitted to the United States as participants in international cultural exchange programs under section 101(a)(15)(Q) of the Immigration and Nationality Act may be exempt from social security and Medicare taxes. “Q-1,” “Q-2,” and “Q-3” visa holders are aliens whose employment or training affords the opportunity for culture-sharing with the American public. They are allowed to work in the United States for a specific employer in an approved cultural exchange program. The employer must be the petitioner through whom the alien obtained the “Q” visa. Social security and Medicare taxes are not withheld from pay for this work unless the alien is considered a resident alien. Aliens with “Q” visas are not permitted to engage in employment outside the exchange program activities.
If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement. Attach the following items to Form 843.
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A copy of your Form W-2 to prove the amount of social security and Medicare taxes withheld.
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A copy of your visa.
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Form I-94 (or other documentation showing your dates of arrival or departure).
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If you have an F-1 visa, Form I-20.
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If you have a J-1 visa, Form DS-2019.
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If you are engaged in optional practical training, Form I-766 or Form I-688B.
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A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or you authorized your employer to claim. If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer or on Form 8316 claiming your employer will not issue the refund.
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If you were exempt from social security and Medicare tax for only part of the year, pay statements showing the tax paid during the period you were exempt.
File Form 843 (with attachments) with the Department of the Treasury, Internal Revenue Service Center, Philadelphia, PA 19255.
Self-employment tax is the social security and Medicare taxes for individuals who are self-employed. Nonresident aliens are not subject to self-employment tax. Residents of the U.S. Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are considered U.S. residents for this purpose and are subject to the self-employment tax.
Resident aliens must pay self-employment tax under the same rules that apply to U.S. citizens. However, a resident alien employed by an international organization, a foreign government, or a wholly-owned instrumentality of a foreign government is not subject to the self-employment tax on income earned in the United States.
Self-employment income you receive while you are a resident alien is subject to self-employment tax even if it was paid for services you performed as a nonresident alien.
Example.
Bill Jones is an author engaged in the business of writing books. Bill had several books published in a foreign country while he was a citizen and resident of that country. During 2007, Bill entered the United States as a resident alien. After becoming a U.S. resident, he continued to receive royalties from his foreign publisher. Bill reports his income and expenses on the cash basis (he reports income on his tax return when received and deducts expenses when paid). Bill's 2007 self-employment income includes the royalties received after he became a U.S. resident even though the books were published while he was a nonresident alien. This royalty income is subject to self-employment tax.
The United States has entered into social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries. These agreements are commonly referred to as totalization agreements. Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. The agreements generally make sure that social security taxes (including self-employment tax) are paid only to one country. Agreements are in effect with the following countries.
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Australia.
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Austria.
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Belgium.
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Canada.
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Chile.
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Finland.
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France.
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Germany.
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Greece.
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Ireland.
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Italy.
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Japan.
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The Republic of Korea (South Korea).
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Luxembourg.
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The Netherlands.
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Norway.
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Portugal.
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Spain.
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Sweden.
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Switzerland.
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The United Kingdom.
Agreements with other countries are expected to enter into force in the future.
U.S. Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, MD 21235-7741
You may have income from which no U.S. income tax is withheld. Or the amount of tax withheld may be less than the income tax you estimate you will owe at the end of the year. If so, you may have to pay estimated tax.
Generally, you must make estimated tax payments for 2008 if you expect to owe at least $1,000 in tax and you expect your withholding and credits to be less than the smaller of:
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90% of the tax to be shown on your 2008 income tax return, or
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100% of the tax shown on your 2007 income tax return (if your 2007 return covered all 12 months of the year).
If your adjusted gross income for 2007 was more than $150,000 ($75,000 if your filing status for 2008 is married filing separately), substitute 110% for 100% in (2) above if you are not a farmer or fisherman. Item (2) also does not apply if you did not file a 2007 return.
A nonresident alien should use Form 1040-ES (NR) to figure and pay estimated tax. If you pay by check, make it payable to the "United States Treasury."
Note.
If you expect to be a resident of Puerto Rico during the entire year, use Form 1040-ES or Forma 1040-ES (Español).
1st installment | April 15, 2008 |
2nd installment | June 16, 2008 |
3rd installment | Sept. 15, 2008 |
4th installment | Jan. 15, 2009 |
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½ of your estimated tax by June 16, 2008,
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¼ of the tax by September 15, 2008, and
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¼ by January 15, 2009.
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