Withholding certificate and exemption for nonresident employees

Withholding exemptions

An eligible nonresident employee may claim a tax treaty withholding exemption on all or part of income from services performed as an employee in the United States. The eligible employee must provide the employer/payor with a properly completed Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual for the tax year.

Special instructions for Form W-4 for nonresident employees

A nonresident subject to wage withholding must give the employer a completed Form W-4, Employee's Withholding Certificate, to enable the employer to figure how much income tax to withhold.

Before completing Form W-4, a nonresident employee should see Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, which provides nonresidents who are not exempt from withholding instructions for completing Form W-4, and the Instructions for Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Also, see chapter 8 of Publication 519, U.S. Tax Guide for Aliens, for important information on withholding.

Special instructions for Form W-4 for nonresident employers

For wages paid to nonresident employees, employers are required to add an amount to the nonresident employees' wages solely for calculating the income tax withholding for each payroll period. The amount to be added to the nonresident employee's wages to calculate income tax withholding is set forth in Chapter 9 of Publication 15, (Circular E), Employer's Tax Guide.

Note: Nonresident students and business apprentices from India are not subject to this procedure.

The amounts added to wages should not be included in any box on the nonresident employee's Form W-2, Wage and Tax Statement, and do not increase the income tax liability of the nonresident employee. Also, these amounts do not increase the Social Security, Medicare, or FUTA tax liability of the employer or the nonresident employee. This procedure only applies to nonresident employees who have wages subject to income tax withholding.

A Form W-4 remains in effect until the employee gives an employer a revised form. If an employee gives an employer a Form W-4 that replaces an existing Form W-4, an employer begins withholding no later than the start of the first payroll period ending on or after the 30th day from the date when an employer received the replacement Form W-4.

Invalid Forms W-4. Any unauthorized change or addition to Form W-4 makes it invalid. This includes taking out any language by which the employee certifies that the form is correct. A Form W-4 is also invalid if, by the date an employee gives it to an employer, the employee indicates in any way that it is false. An employee who submits a false Form W-4 may be subject to a $500 penalty.

When an employer receives an invalid Form W-4, the employer should not use it to figure federal income tax withholding. The employer should inform the employee that it is invalid and ask the employee for a corrected form. If the employee does not provide an employer with a valid form, and the employer has an earlier Form W-4 for this employee that is valid, the employer withholds based upon the earlier Form W-4. If the employer does not have an earlier Form W-4 that is valid, the employer withholds tax as if the employee had checked the box for Single or Married filing separately in Step 1(c) and made no entries in Step 2, Step 3 or Step 4 of the 2024 Form W-4.

References/Related topics

• Pay for personal services performed
• Aliens employed in the U.S.
• Claiming tax treaty benefits
• Notice 2005-76, IRB 2005-46
• Publication 505, Tax Withholding and Estimated Tax