Nonresident Aliens for Tax Purposes
Who is considered a nonresident alien for federal income tax purposes?
There are two tests to determine whether a non-U.S. citizen is treated as a resident alien for tax purposes, the "green card" test and the "substantial presence" test. See the Foreign National Payments & Tax Withholding page for further information.
What is the difference in taxable income between individuals classified as resident and nonresident aliens for tax purposes?
Resident aliens are taxed just like U.S. citizens and are subject to U.S. tax on their worldwide income. Nonresident aliens are taxed on a slightly higher scale for wages and may be subject to a flat rate of tax on other kinds of payments (such as scholarships). However, nonresident aliens are taxed on their U.S. source income only. See the Foreign National Payments & Tax Withholding page for further information.
What types of payments made to a foreign national are considered taxable income for a nonresident alien for tax purposes?
All U.S. source payments to the nonresident alien are subject to federal withholding tax, unless an exception applies. These payments may include, but are not limited to: awards; compensation; consulting fees; honorarium; royalties; scholarships/fellowships; stipends; and wages. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign national’s country of residence and the United States. See the Foreign National Payments & Tax Withholding page for further information.
Why must a foreign vendor submit a W-8BEN or W-8BEN-E to UW?
The UW, in accordance with U.S. tax law, must obtain a signed, completed W-8BEN (for individuals) or a W-8BEN-E (for entities) in order to process a payment to a foreign vendor. The form serves to verify foreign status. Also, it is used to claim an exemption from withholding under a US Tax Treaty. If the vendor chooses not to submit the form, the UW is required to withhold taxes at rate of 30 percent.
Students
Are international students exempt from U.S. taxes?
No, international students are not exempt from U.S. taxes. A reduced tax rate, including an exemption, may apply if there is a tax treaty between the foreign national’s country of residence and the United States. See the Federal Withholding Tax for Foreign Nationals page for further information.
Do students have to pay taxes on a scholarship?
It depends on the source of the scholarship. All scholarships paid by the UW are considered U.S. source and subject to U.S. tax. However, if the student is a candidate for a degree, the part of the scholarship used to pay tuition, fees, books, supplies and equipment required by the educational institution may be excluded from taxation. However, any part of the scholarship used to pay other expenses, such as room and board, is taxable. See the Foreign National Payments & Tax Withholding page for further information.
Tax Identification Numbers (SSN and ITIN)
What should a foreign national do if he or she is unable to get a Social Security Number for a spouse or dependent child?
If the foreign national's spouse or dependent is not eligible for a Social Security Number (SSN), an application must be made for an Individual Taxpayer Identification Number (ITIN). To apply for an ITIN for a dependent, fill out IRS Form W-7, and follow instructions on IRS Publication 1915, Understanding your IRS Individual Taxpayer Identification Number ITIN.
Can a foreign national from a tax treaty country who is allowed to claim an exemption for a spouse and/or child do this if their spouse and/or child doesn't have either a Social Security Number or an ITIN?
No. In order to claim personal exemptions for dependents they must have a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). To apply for an ITIN for a dependent, fill out IRS Form W-7, and follow instructions on IRS Publication 1915, Understanding your IRS Individual Taxpayer Identification Number ITIN.
Paying Taxes to the Internal Revenue Service
Does a foreign national who is a nonresident alien for tax purposes who only worked for a very short time in a calendar year and didn't earn very much still have to file a tax return?
Yes. A nonresident alien for tax purposes who had any U.S. source income or received a taxable scholarship payment(s) must file a tax return. See the Federal Withholding Tax for Foreign Nationals page for further information.
Does a nonresident alien from a country that has a tax treaty with the U.S. who earned below $5000, which is the amount of wage exempt by the treaty, still need to file?
Yes. A nonresident alien for tax purposes must file a tax return. In the case where the person earned more than the exempt amount of the tax treaty, both an IRS Form W-2 and an IRS Form 1042-S will be sent. See the Federal Withholding Tax for Foreign Nationals page for further information.
What happens if a nonresident alien for tax purposes fails to file a tax return?
Failure to file the appropriate tax returns, making intentionally false or misleading statements on tax returns or otherwise failing to comply with U.S. tax law can lead to the imposition of fines and penalties including potential criminal penalties. See the Federal Withholding Tax for Foreign Nationals page for further information.