Info for Nonresident Aliens
Non U.S. Citizen that fall under IRS Residency determination of “Nonresident Aliens” are subject to the specific taxation and reporting rules that are very different than U.S. Citizens or Resident Aliens rules.
> Read about some of the key differences
For each payment type, detailed information about key rules, impacts, forms, year-end tax statements and taxation and filing references are provided in the documents below.
Select the payment typethat applies to you (Non Resident Alien):
Key Differences: Taxation and Reporting Rules for Nonresident Aliens
- As a general rule (excluding employee payments) nonresident alien payments are subject to a require flat withholdings rate of 30%.
For each payment classification there are separate, applicable rules that may avail certain tax withholding exceptions (i.e. income tax treaty exemption) or reduced rates from the 30% if the individual is allowed to claim the exemption or reduced rate AND the proper IRS forms are completed.
Except for employees, U.S. Citizen or Resident Alien tax rules do not require withholdings.
- Reportable nonresident alien payments must all be reported on the 1042-S. In some situation U.S. Citizen or Resident Alien payments may not require reporting. For example, 1099-MISC thresholds, such as Independent Contractors and less than $ 600 is not reported.
- The form to report nonresident alien income is the 1042-S Foreign Person US Source Income Subject to Withholding (exception - NRA employees subject to tax withholding get a W-2), where as US Citizens or Resident Aliens receive a W-2 Wage and Tax Statement for employees, or some receive a 1099-MISC Miscellaneous Income.
- Nonresident alien fellowships fall under the general 30% withholding rule, although the IRS rules allow a 14% reduced rates and all is reportable on the 1042-S.
For U.S. Citizen or Resident Aliens no official withholding or reporting is required to go to the IRS. The RF sends out a “RF Payment Reporting Memo” to notify the fellow of the payments for the year.