Nonresident Alien Determination for Payroll Purposes
A. Tax Residency
B. Green Card Test
The Green Card test is used to determine Permanent Residency Status. A permanent resident is someone who has been granted authorization to live and work in the United States on a permanent basis. An individual meets the test on the date his or her permanent resident alien status is approved by the U.S. Citizenship and Immigration Service. The effective date is the notice date on Form I-551 (Green Card or Alien Registration Card) or on the I-797 (Notice of Action).
C. Substantial Presence Test
The Substantial Presence Test is used to determine whether an individual is a Resident Alien for Tax Purposes or a Nonresident Alien. To meet this test, the individual must be physically present in the United States on at least:
- 31 days in the current calendar year, and
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days present in the current year, and
- 1/3 of the days present in the first year before the current year, and
- 1/6 of the days present in the second year before the current year
Click here for a calculator to help determine days present in the United States. Click here for the form that must be filed in the Office of Human Resources.
Tax Residency and Taxes
Income Tax Withholding
Unless the employee claims a specific tax treaty exemption, the University must withhold income taxes on wage payments to nonresidents. The amount to be withheld is based on the IRS tax tables for the payment year. An additional amount is added to wages solely for the purpose of calculating income tax withholding. The additional amount can be found in IRS Publication 15.
Income Tax Treaties
The United States has tax treaties with a number of foreign countries. Under these treaties, tax residents of foreign countries are taxed at a reduced rate or are exempt from United States taxes on certain items of income they receive from sources within the U.S.
View Tax Treaty Forms by Country >
In addition to the form for the employee’s country, the employee also must complete Form 8233.
W-4 Information
All nonresident alien employees are required to complete a Form W-4. According to the Internal Revenue Service, nonresident aliens should:
- Not claim exemption from income tax withholding
- Request withholding as if they are single, regardless of their actual marital status
- Skip Section 3 unless they are from Canada, Mexico, South Korea, or India
- Write “Nonresident Alien” or “NRA” in the space below Step 4(c)
- See Publication 519 for more information
Are you a student employee?
Find more information on our International Student Taxation website.