A. Purpose The purpose of this Statement is to provide procedures in the completion of tax withholding forms for nonresident alien student employees (graduate student research and teaching assistants as well as other student employees) who are receiving compensation while training.
B. General Guidelines/Applicable Policies
1. 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.
See Part C1 below for instructions.
b. If the alien determines that he is a nonresident alien for tax purposes, refer
to the following Statements for tax withholding instructions:
3. Federal and State Income Tax Withholding Nonresident aliens generally are required to file a U.S. Nonresident Income Tax Return (Form 1040NR) with the Internal Revenue Service and a North Carolina Individual Income Tax Return (D-400) with the State Department of Revenue by April 15 of the following year. Employees should be instructed to call the IRS or the N.C. Department of Revenue for assistance.
The University Payroll Office issues by January 31 of each year IRS Form W-2 to employees with taxable income and by March 15 IRS Form 1042S to employees with nontaxable income. These forms are to be used in completing the income tax withholding forms 1040NR and D400.
Nonresident alien employees who are from countries with relevant tax treaties will use Form 8233 and a treaty statement to claim exemption from federal and state income tax due to the tax treaty (in lieu of Forms W-4 and NC-4). See the Student Tax Treaty Country List at the end of this Statement.
Withholding automatically will begin after earnings exceed the tax treaty maximum as though the foreign student had filed Forms W-4 and NC-4 claiming single with one withholding allowance. The student will be contacted by University Payroll upon exceeding the earnings limit. When a new calendar year begins, the foreign student will once again be eligible for the tax exemption if he has not exceeded either the earnings ceiling or the time limit stipulated in the tax treaty. In order to begin tax exemption again at the beginning of a new calendar year, the student must complete another Form 8233 and Attachment by January 10.
The treaty statements are specific for each country and provisions may vary for each category of payment. Because of the magnitude of forms needed (one for each tax treaty country), partially completed forms by country have not been included in this Statement. A complete set of forms or the forms for a specific country may be obtained from the University Payroll Office, 515-4370.
b. Employees From India
The federal income tax withholding benefits to Indian students of the United States/India tax treaty must be claimed on Form PYNRA3, Withholding Allowance Certificate Form W-4 Nonresident Alien Students From India Claiming Benefits of U.S./India Tax Treaty Article 21(2). While the treaty does not allow exemption from income tax withholding, it does permit students to claim allowances for qualified dependents.
c. Employees Not From Tax Treaty Countries
Federal Tax Withholding: The Internal Revenue Service restricts the withholding status of nonresident aliens not covered by an income tax treaty. These employees will complete federal Form W-4 using the instructions in this Statement, Part C4 below.
State Tax Withholding: The North Carolina Department of Revenue follows federal tax guidelines in the treatment of nonresident aliens. These employees will complete state Form NC-4 using the instructions found in this Statement, Part C4 below.
2. Enter employee name.
3. Fill in social security number.
4. Enter University department.
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.
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.
23. Enter street address in country of residence.
2. Social Security Tax Withholding The nonresident alien's visa type must be coded on the appropriate personnel action through PICS, and this entry will determine if the employee is subject to social security tax withholding based upon the visa type. If the alien's visa type changes at any time during the alien's stay, the department must process a new personnel action immediately. Failure to report changes in visa status may result in penalties levied by the federal government. Such penalties will be charged to the employing department.
3. Employees From Tax Treaty Countries Check the list of countries with which the U.S. has tax treaties covering students on page 9 of this Statement. If the student is a resident of a tax treaty country, have him read the Official Attachment for that country.
If the student agrees with all the terms of the Attachment, have him complete the Attachment. Be sure that the student understands that all conditions on the form must be true to be eligible for the tax treaty exemption.
2. Name - Enter name.
3. Address in Home Country - Enter permanent foreign address (in country of legal residence).
4. Current Visa Information - Enter the type, issue date, and expiration date of current visa.
5. Date of Arrival - Enter the U.S. arrival date specified from the passport.
6. Signature - The student should sign and date the form.
Have the student complete the Form 8233. Be sure that the form being used stipulates "STUDENT" and is for the correct country of residence.
2. Address - Enter the student's temporary address while living in the United States.
3. Social Security Number - Enter student's social security number. Nonresident aliens must have a valid United States social security number or must provide a receipt from the Social Security Administration that an application has been made.
4. Visa Number - Enter the student's visa number appearing at the top of the U.S. visa stamp in the passport.
5. Passport Number - Enter the passport number appearing at the front of the student's passport.
6. Permanent Foreign Address - Enter the student's permanent foreign address in the country of legal residence.
7. Job Description - Circle the appropriate job description.
8. Student Signature - Student should sign and record date of signature.
d. If the student does not agree to the statements in the Attachment, or he has exceeded the period covered or the earnings limit stipulated by the treaty, he should complete Form W-4 and Form NC-4, following the instructions for nonresident aliens not from tax treaty countries in this Statement, Part C4 below.
Because of the detailed federal withholding instructions for Indian students, we have not duplicated the instructions here. Be advised that this is a two-sided form, and that both sides are included.
b. State Tax Withholding Form NC-4
At this time, the North Carolina Department of Revenue has not issued instructions for Indian students. Until further notice, students should complete Form NC-4 using the following instructions:
2. Claim only ONE withholding allowance on line 4.
3. In addition to following these instructions, you must request that your employer withhold an additional amount of $4.00 per week (on line 5 of Form NC-4) If your wages are paid based on a biweekly payroll, the additional amount will be $8.00. If your wages are paid on a monthly payroll, the additional amount will be $16.00.
4. Do NOT claim "EXEMPT" withholding status on line 6.
Because of the restrictions on a nonresident's filing status, the limited number of personal exemptions a nonresident is allowed, and the fact that a nonresident alien cannot claim the "standard deduction," the Form W-4 must be completed using the following instructions taken from Internal Revenue Service Publication 519, U.S. Tax Guide For Aliens:
2. Claim only ONE withholding allowance on line 5, unless you are a resident of Canada, Mexico, Japan, or the Republic of Korea, or a U.S. national. Residents of these five countries may claim withholding allowances using the same rules as U.S. citizens (complete the Personal Allowance Worksheet to determine allowances).
3. In addition to following these instructions, you must request that your employer withhold an additional amount of $4.00 per week (on line 6 of Form W-4). If your wages are paid based on a biweekly payroll, the additional amount will be $8.00. If your wages are paid on a monthly payroll, the additional amount will be $16.00.
4. Do NOT claim "EXEMPT" withholding status on line 7.
Nonresident aliens not from tax treaty countries use Form NC-4 for state income tax withholding. You should claim the same marital and withholding status for state income tax withholding as you did for federal tax. Please note that Head of Household marital status means that you are single with a dependent child.
Form 8233 with the country-specific Official Attachment, Form W-4, and Form NC-4 also may be obtained from the University Payroll Office, 515-4370.
U.S. TAX TREATIES COVERING
COMPENSATION TO STUDENTS DURING TRAINING
COUNTRY MAXIMUM MAXIMUM TAX
OF PRESENCE AMOUNT TREATY
RESIDENCE IN U.S. EXEMPT ARTICLE
(YEARS) (PER YEAR)
_________________________________________________________________________
Belgium 5 $2,000 21(1)
PR China No Limit $5,000 20(C)
C.I.S. ** 5 $10,000 VI(1)
Cyprus 5 $2,000 21(1)
Czech Republic 5 $5,000 21
Egypt No Limit $3,000 23(1)
France 5 $5,000 18(1)
Germany 4 $5,000 20(4)
Iceland 5 $2,000 22(1)
India-Special provisions on Form W-4. No exemption. 21(2)
Indonesia 5 $2,000 19(1)
Israel 5 $3,000 24(1)
Japan 5 $2,000 20(1)
Korea, Rep. of (South) 5 $2,000 21(1)
Morocco 5 $2,000 18
Netherlands 5 $2,000 XVIII(1)
Norway 5 $2,000 16(1)
Pakistan No Limit $5,000 XIII(1)
Philippines 5 $3,000 22(1)
Poland 5 $2,000 18(1)
Portugal 5 $5,000 23(1)
Romania 5 $2,000 20(1)
Russia 5 No Limit 18
Slovak Republic 5 $5,000 21
Spain 5 $5,000 22(1)
Trinidad & Tobago 5 $2,000 19(1)
Tunisia 5 $4,000 20
** C.I.S. - Commonwealth of Independent States include Armenia,
Azerbaijan, Belarus, Georgia, *Kazakhstan, *Kyrgyz Republic,
Moldova, Tajikistan, Turkmenistan, Ukraine, Uzbekistan.