Withholding Tax for Nonresident Alien

By | March 23, 2015

What should a U.S. employer do when receiving documentation and paperwork from a nonresident alien who has not satisfied all of the requirements of the W-4? Remember: A nonresident alien who fails to file a valid Form W-4 must have federal income taxes withheld at the single status, zero withholding allowances rates. U.S. employers should advise nonresident aliens to review IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, before completing the Form W-4. U.S. employers should know that nonresident aliens.


Information about  Form W-4 for Employers

  • Cannot write “exempt” on line 7 of the Form W-4; and • May only claim “single” for their filing status on line 3 of Form W-4, regardless of their actual marital status.
  • With limited exceptions, a nonresident alien cannot claim more than one withholding allowance on their W-4.
  • And, finally, they are required to write “Nonresident Alien” or “NRA” above the dotted line of line 6.

How does a U.S. employer calculate the amount to be withheld for a nonresident alien?


Wage Withholding for Non-Resident Aliens

Because the wage withholding tables are designed for U.S. citizen employees, a standard deduction amount is built into the calculation. Because a nonresident alien employee is not entitled to the standard deduction, use of the tables for a nonresident alien would result in under-withholding on income tax calculations unless an adjustment is made. To solve this problem, the IRS introduced a gross-up procedure for payroll processing effective January 1, 2006.


Calculate how much income tax to withhold from the wages of a NRA

There are two steps required to calculate how much income tax to withhold from the wages of a NRA. Publication 15 provides a chart showing the additional amount to be added to wages for calculating income tax withholding on individuals not eligible for the standard deduction. The first step is to add the adjustment found in Pub. 15 to the amount of wages paid to the nonresident alien employee. The second step uses the adjusted amount from Step 1 and the number of withholding allowances claimed (usually limited to one allowance) on the W-4 to figure out the withholding from the tables used for all employees.


Tax Effect of W-4

The employer should explain to their nonresident alien employees that the amounts added under the chart are solely for the purpose of calculating federal income tax withholding and nothing else.

  • The chart amounts are not included in any box on the employee’s Form W-2;
  • They do not increase the Federal income tax liability of the employee;

Nonresident Aliens and Form W-4

To claim an exemption under a tax treaty, the nonresident alien individual must file a Form 8233 with their employer. Form 8233 is used by non resident alien individuals to claim exemption from withholding on compensation for personal services because of an income tax treaty or the personal exemption amount.