University Payroll Office
Determination of Tax Status/ Claiming Tax Residence

A. Purpose

The purpose of this Statement is to provide procedures used to determine if an alien is a resident or nonresident for income tax purposes, and to provide guidance in the completion of tax withholding forms for aliens who are residents for income tax purposes.

B. General Guidelines/ Applicable Policies

1. Immigration and Tax Law Definitions (Source: University Of Chicago, "Foreign Student Tax Guide")

This section is intended as a general guide on residence status for tax purposes. Please note that there are significant differences between the definitions of residence status for immigration law purposes and tax law purposes.

IMMIGRATION LAW:

a. A nonresident alien is a person who is not a citizen of the United States admitted for a temporary stay that will end when the purpose of that stay has been met.

b. A resident alien, for IMMIGRATION purposes, is the same as an immigrant, or a "green card" holder - a non-United States citizen who has been authorized to live and work in the United States indefinitely.

TAX LAW:
a. A nonresident alien for tax purposes is a non-United States citizen who, during his or her stay in the United States, either pays United States tax only on income from sources inside the United States, or else is exempt from paying United States income tax because of a treaty between the United States and the government of his or her country of residence for tax purposes. A nonresident alien receives no tax exemption for dependents. A nonresident alien for tax purposes must file an income tax return on IRS Form 1040NR (Income Tax Return for Nonresident Aliens).

b. A resident alien FOR TAX PURPOSES must pay tax to the United States government on income from all sources, worldwide, and cannot take advantage of tax treaties between the United States and other countries. Individuals who are resident aliens for tax purposes can claim exemptions for dependents. A resident alien for tax purposes files a return on IRS Form 1040, 1040A, or 1040EZ.

Categories established for immigration purposes do not necessarily coincide with those set up for tax purposes. Under certain circumstances, a nonresident alien for IMMIGRATION purposes may be a resident alien for TAX purposes. Thus, individuals who are not citizens of the United States must take care to determine whether they are resident or nonresident aliens for tax purposes. Only then will they know how their income will be taxed and which income tax return form to file. For current information on tax laws regarding resident and nonresident aliens, IRS Publications 513, 515, 519, and 901 should be consulted.

2. Determination of Tax Status

Complete Form PYRL09, Alien Information Request Form, providing information necessary for determination of residence status for tax withholding. This form must be completed by all aliens before beginning work at North Carolina State University.

a. If the alien determines that he is a resident alien for tax purposes, he should complete IRS Form 1078, Form W-4, and Form NC-4 per the instructions in Part C2 below.

b. If the alien determines that he is a nonresident alien for tax purposes, please refer to the following statements for tax withholding instructions:


Honorarium Payments - see Section G, Statement 10B
Teacher/Researcher - see Section G, Statement 12
Students - see Section G, Statement 13

3. Visa Status: Social Security Tax Withholding

Nonresident alien employees on F-1 or J-1 visas are not subject to social security tax withholding. Nonresident alien employees holding J-2, H-1B, H-4 or TC-1 visas are subject to social security tax withholding unless they meet the criteria for student employee exemption outlined in Section G, Statement 11.

1. PYRL09 Alien Information Request Form

All aliens must complete Form PYRL09, Alien Information Request Form, to establish correct visa information and to determine residence status for tax withholding.

a. General Information

1. Indicate if this is a new or revised form.

2. Enter employee name.

3. Fill in social security number.

4. Enter University department.

b. Citizenship and Visa Information
5. Enter country of citizenship.

6. Enter country of residence.

7. Enter visa type from I-94 card.

8. Enter visa number from top of visa stamp in passport.

9. Enter country issuing passport.

10. Enter passport number.

11. Complete date entered United States.

12. Enter expiration date on I-94 card.

13. Indicate if this is the first visit to United States.

14. If not first visit, indicate previous visa type.

15. Enter intended length of stay in United States.

16. Indicate if employee is candidate for NCSU degree.

c. Determination of Residence Status For Federal Tax Withholding
17. Complete Test 1.

18. Complete Test 2, if applicable.

19. Complete Test 3, if applicable.

20. Complete Test 4, if applicable.

21. Enter Test Results. This section must be completed.

d. Address Information
22. Enter street address while in United States.

23. Enter street address in country of residence.

e. Certification of Information Provided on Form
24. Sign and date the form.

2. Form 1078 Alien Claiming Residence Status For Tax Purposes
a. Complete IRS Form 1078 only if results of Form PYRL09 indicate that you qualify to claim residence status for tax purposes.
1. Complete name.

2. Fill in social security number.

3. Complete address in the United States.

4. Enter occupation in the United States.

5. Enter date of employment in the United States.

6. Enter citizenship country.

7. Enter admission date.

8. Enter visa number and class (type).

9. Sign and date form.

b. Complete IRS Form W-4, Employee Withholding Allowance Certificate, following instructions on form.

c. Complete North Carolina Department of Revenue Form NC-4, Employee Withholding Allowance Certificate, following instructions on form.

Departments should keep on hand a supply of blank copies of both the Form PYRL09 and Form 1078. Forms W-4 and NC-4 are available at the University Payroll Office, 515-4350.