Staff Employment Process for Nonresident Aliens and Resident Aliens for Tax Purposes

1. A person hired to work at UR as a staff member must first complete paperwork in the Human Resources (HR) department.
   
   
   
2. An NRA or RA staff member will need to take the extra step and visit the Office of International Taxation.  "Green card" holders, do not need to visit OIT.
   
   
   
3. HR will make an appointment for you to meet with Nancy Colón, Office of International Taxation to complete international taxation paperwork and an application for a social security card, if necessary.
   
   
   
4. Required Forms to bring to Office of International Taxation:
• Passport
• Visa
• I-94 with Customs & Boarder Protection entry stamp
• Social Security Card (if applicable)
• Foreign National Information Form (bring a completed copy of this with you to your meeting)
  
  
  
5. Forms to be completed in the Office of International Taxation:
• I-9 Form
• W8-BEN (Certificate of Foreign Status) or W-9 (Request for Taxpayer Identification Number and Certification)
• SS-5 (Social Security application form, if you currently do not have an social security number)
• W-4 and VA-4 (tax forms -- if applicable)
• Form 8233 (if treaty benefits are allowed). Note: This will be faxed to the IRS by the Office of International Taxation.
  
  
  
6. Forms that will be sent to Human Resources by the Office of International Taxation:
• Copy of the passport, visa and I-94 Card
• Copy of the I-9 Form
• Copy of the W-4 and the VA-4
• Copy of the social security card, when obtained

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Faculty Employment Process for Nonresiden Aliens and Resident Aliens for Tax Purposes

1. A person hired to work at UR as a faculty member must first complete paperwork in the Human Resources (HR) department.
   
   
   
2. An NRA or RA faculty member will need to take the extra step and visit the Office of International Taxation.  "Green card" holders, do not need to visit OIT.
   
   
   
3. HR will make an appointment for you to meet with Nancy Colón, Office of International Taxation to complete international taxation paperwork and an application for a social security card, if necessary.
   
   
   
4. Required Forms to bring to Office of International Taxation:
• Passport
• Visa
• I-94 with Customs & Boarder Protection entry stamp
• I-20, DS-2019, H-1B paperwork
• Social Security Card (if applicable)
• Foreign National Information Form (bring a completed copy of this with you to your meeting)
  
  
  
5. Forms to be completed in the Office of International Taxation:
• I-9 Form
• W8-BEN (Certificate of Foreign Status) or W-9 (Request for Taxpayer Identification Number and Certification)
• SS-5 (Social Security application form, if you currently do not have an social security number)
• W-4 and VA-4 (tax forms -- if applicable)
• Form 8233 (if treaty benefits are allowed). Note: This will be faxed to the IRS by the Office of International Taxation.
  
  
  
6. Forms that will be sent to Human Resources by the Office of International Taxation:
• Copy of the passport, visa and I-94 Card
• Copy of the I-9 Form
• Copy of the W-4 and the VA-4
• Copy of the social security card, when obtained

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Volunteering Rules

Under immigration law, unpaid employment is still employment if it meets any of the following 3 tests -- (1) is the individual compensated in any way for services from a US source (typically the entity at or for which services are performed); (2) but for such services, the US entity would have to hire a US worker to perform the services; (3) the primary benefit of the services inures to the US entity at or for which the services are performed.

To Explain:

1. There is a common misconception that "volunteer work" is not employment, but that is true only if the volunteer activity is charitable in a traditional way.
   
   
   
2. The issue that must be decided is whether the volunteer activity would be employment, whether compensated or not.
   
   
   
3. Foreign nationals may only volunteer for jobs that are traditionally filled by non paid volunteer workers. Volunteering for any other position is viewed as taking a position that would otherwise be filled by a US citizen or work authorized alien.
   
   
   
4. If the activity is really unpaid employment, it is prohibited during unauthorized periods, including the 60 day post-OPT period.
   
   
   
5. Training Experience: If services are provided they would be considered to primarily benefit the alien if no productive value is provided to the US entity (except incidentally) and the services constitute a bona fide training experience for him/her. If any work product is provided to the hosting entity, however, the activities are considered employment and not acceptable for any visitor.
   
   
   
6. Gap in Visa: If there is an unavoidable gap between the end of one visa status and the start of another visa status, the NRA must stop working. The NRA can not volunteer time until the new visa is approved or begins. In fact, the NRA shouldn't go anywhere near the department in any type of employment or research capacity until the change of status approval is received. Any activity that falls under the job description that the NRA will ultimately be paid for, once the COS is approved, should be avoided.

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Employment Authorization Document (EAD)

U.S. employers must check to make sure all employees, regardless of citizenship or national origin, are allowed to work in the United States. If an individual is not a citizen or a lawful permanent resident, that individual may need to apply for an Employment Authorization Document (EAD) to prove he may work in the United States.

To Explain:

1. Certain classes of applicants for immigration benefits are entitled to an interim employment authorization document (EAD.)
• An EAD is a Department of Homeland Security (I-688B / I-766) document issued to certain categories of aliens who are not legal permanent residents (LPR).
• An EAD gives a person legal status to work in the United States.
• An EAD has fewer privileges than a green card.
• An EAD authorizes work in the US and generally always shows an expiration date (usually one year from date issued.)
• An EAD is renewable.
• Any alien with a valid Employment Authorization Document (Form I-766 or Form I-688B) is entitled to be issued a Social Security number.
  
  
  
2. There are instances when an EAD is required for a foreign student before an SSN can be assigned.
   
   
   
3. NRA's entitled to an EAD document:
• Foreign nationals in the US pursuing the final stage of permanent residence
• Refugees
• Certain applicants for political asylum
1. Asylees are considered "work authorized incident to status" and may continue to work lawfully even after an EAD is expired
2. Asylees may work without an EAD, if they have evidence of their asylee status
• Nationals of certain countries given Temporary Protected Status (TPS) due to adverse conditions in their home countries
1. Determined by the US Attorney General
2. Typically receive a one-year period of employment authorization
3. May apply for an EAD
   
   
   
4. The basis for the EAD can be identified via the category designation in the center front of the card. The eligibility code on the EAD should describe why he has the EAD, which usually gives some clue to the underlying immigration status.
• Designation "C" in the center of the card (i.e. C09 or 274a.12c)
1. Must reverify the expiring work authorization
2. Must present a newly issued card or another List A & C document from the I-9
• Designation "A"
1. Work authorized incident to status
2. Must reverify the expiring work authorization
3. May be able to provide proof of status
   
   
   
5. DHS's US Citizenship and Immigration Services (USCIS) issues EADs in the following categories:
• EAD: This document proves you are allowed to work in the United States
• Renewal EAD: You should apply for a renewal EAD six months before your original EAD expires
• Replacement EAD: This document replaces a lost, stolen, or mutilated EAD. A replacement EAD also replaces an EAD that was issued with incorrect information, such as a misspelled name
• Interim EAD: If USCIS does not approve or deny your EAD application within 90 days (within 30 days for an asylum applicant; note: asylum applicants are eligible to file for EADs only after waiting 150 days from the date they filed their properly completed original asylum applications), you may request an interim EAD document
  
  
  
6. 8 CFR 274a.12(b) lists employer-specific aliens who do not get EADs, but use their endorsed I-94's as employment authorization documents. This group includes but is not limited to E, H, I, J, L, O, P, R and TN aliens.
• H1-B: The only time an H-1B will have an employment authorization card is if their employer has sponsored them (or they've self-petitioned) for a green card and they've gotten the EAD from filing an I-765 with the green card paperwork. (The most common scenario is that the cardholder was "sponsored" for permanent residence by a US employer or relative (such as a spouse).  In this case, an H-1B alien can apply for an adjustment-based EAD when the "sponsor" files the petition.  The category in this case is C09.  An H-1b in this case can work either under H-1b status or unrestricted under the EAD.)
  
  
  
7. 8 CFR 274a.12(c) lists aliens who are not work authorized incident to status, but are entitled to apply for employment authorization (EADs). They may not, accordingly, work in the U.S. until they apply for and receive EADs.
• A-1 / A-2: Dependents of foreign diplomatic personnel may be employed with prior DOS and CIS approval and are eligible for unrestricted temporary work authorization for the duration of the principal A-2s assignment.  Those A-2s have EADs and may work, including self-employment.
• E-2: spouses are authorized to accept unrestricted employment and must apply for an EAD
• F-1 students eligible for OPT: During OPT a student would still have F-1 status derived from the university from which he/she graduated.  The student would also have an EAD that does not indicate any particular school.  During the OPT period a students work authorization is unrestricted as long as the job is at the appropriate level within the field of study.  It is not uncommon for graduate PhDs at one school to accept OPT employment at another school.
• G-1 / G-3 / G-4: dependents of representatives to international organizations may be employed with prior DOS and CIS approval
• J-2 aliens: A J-2 has unrestricted work authorization, including self-employment, as long as he has obtained the EAD to which he is entitled.  With the EAD, and if the J-1 principal remains in his J-1 program, the J-2 can work anywhere in the US and be paid anything related to those services. (The income must not be necessary for the support of the J-1).
• K-1: fiancées of US citizens may work for 90 days following admission to the US (work authorization extended by filing an immigrant visa petition to adjust status)
• K-3: spouses of US citizens may receive an EAD
• L-2: spouses are authorized to accept unrestricted employment and must apply for an EAD
• Adjustee: A person adjusting status (ex: and H1-B adjusting to permanent resident) is eligible for an EAD, which gives him unrestricted work authorization until the EAD expires.  If he is only eligible for the EAD but has not yet received it, the adjustee may not work or be paid. If the adjustee has applied for a renewal of an EAD, he must have the renewal in hand in order to work. This requires applying 90 days in advance. Adjustees are not authorized incident to status. Adjustees are entitled to advance parole in most cases. The advance parole document reinforces that the EAD holder is an adjustee, but the advance parole document is irrelevant for employment authorization purposes.
• Asylee: Entitled to an EAD that would permit unrestricted employment. Asylees are authorized to work incident to status and technically aren't required to have an EAD if they have other proof of identity and employment eligibility. As an asylee he is entitled to an unrestricted Social Security card. Be sure to distinguish an alien who has been granted asylum from an alien whose claim for asylum is pending. The former does not need an EAD to work (asylees are work authorized incident to status -- proven by the grant of asylum) and are eligible for unrestricted SSA cards. Pending asylees need EADs in order to work.
• Permanent Resident: An alien who is in the process of permanent residence needs adjustment of status from nonimmigrant to immigrant (temporary to permanent). During this period, he can apply for an EAD based on adjustment. Prior to obtaining that EAD, the only authorization that alien may have to work is the unexpired nonimmigrant status. If the nonimmigrant status expires or does not permit employment, the alien cannot work.

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I-9 -- Employment Eligibility Verification Form

The Immigration Reform and Control Act made all U.S. employers responsible to verify the employment eligibility and identity of all employees hired to work in the United States after November 6, 1986. To implement the law, employers are required to complete Employment Eligibility Verification forms (Form I-9) for all employees, including U.S. citizens. All U.S. employers are responsible for completion and retention of Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens. On the form, the employer must verify the employment eligibility and identity documents presented by the employee and record the document information on the Form I-9.

To Explain:

1. Form I-9 is kept on file at the University of Richmond.
   
   
   
2. An Unexpired foreign passport with an attached Form I-94 must be presented to verify employment eligibility.
   
   
   
3. Original documents must be presented (photocopies are not allowed.) However, a photocopy of all documents presented will be made. If a person has applied for replacements of missing documents, and has receipts for those applications, the 90-day receipt rule for lost, destroyed or stolen documents may be used.
   
   
   
4. Exceptions to the I-9 requirement:
• J-1 visa students: Original Form I-20 or DS-2019 are acceptable employment authorization documents. (Identity documents in column B and C required.)
• F-1 visa students: Permitted to work for no more than 20 hours per week during school year and 40 hours per week during summer and vacations. (Identity documents are a foreign passport and the I-94 card.)
• J visa professors: Those who are lecturing at non-sponsoring institutions with the permission of their program sponsor and are treated as independent contractors for payment purposes.
• B-1 or B-2 nonimmigrants: Those who are paid honoraria for academic activities are treated as independent contractors for payment purposes.
  
  
  
5. Specifics of the I-9 Form
• Alien authorized to work from _____ (use the date obtained from the I-20 or the DS-2019)
• List A documents:
1. Unexpired foreign passport
2. I-94 card
3. I-20, DS-2019, H-1B documentation
4. I-551 ADIT stamp in an unexpired passport is equivalent to green card.
• Valid until date relates to travel and not to employment authorization.
• It may be expired.
• Pending issuance of the new green card, the sticker clarifies that the alien cardholder remains authorized to work.
• The holder is a permanent resident.
• NOTE: A temporary I-551 stamp (which is placed on the I-94 card) needs to be reverified.
• Expired foreign passport  List A not possible:
• List B documents: J-1 visa
• List C documents: I-94 card and DS-2019 (#7  other)
  
  
  
6. List A -- #s 2, 3, 8 and 9 -- No longer acceptable since 9/30/97. The I-9 form has not been updated, so they technically remain on the list. However, ICE may penalize for used of these items when completing an I-9. The items may be accepted under List C #7, if the individual has a List C document. Furthermore, any alien who has one of these documents will also have some other acceptable List A or List C document. Therefore, an employer may refuse to accept List A #2, 3, 8, and 9.
   
   
   
7. A permanent resident is a permanent resident, even in conditional status. A conditional (2 year) permanent resident card is not treated differently form a 10-year card. It does not required reverification. Permanent residents are treated the same as US citizens.
   
   
   
8. A new I-9 is not required when an employee changes or adjusts status. However, when the I-9s reverification date approaches, or at any time earlier that the employer is presented with proof of status that does not require further reverification (such as an I-551 stamp on an unexpired passport form which you can identify the employee) reverification /updating can be done on Section 3. No further reverification is needed since an I-551 stamp on a passport that appears genuine is a List A document that does not require reverification.
   
   
   
9. SSN Card & I-9 Form
• An SSN card with the notations "Not valid for employment" or "Valid for work only with DHS (or INS) authorization" is not a valid I-9 document. It does not mean the individual is not allowed to work.
1. "Not valid for employment": generally means the card was issued to someone who was not work-authorized or even potentially eligible to work when the card was issued. The card would have been issued for some purpose such as to be able to draw federal benefits (welfare, etc.) for which the person was eligible even if he couldnt be employed.
2. "Valid for work only with DHS/INS authorization": generally means the card was issued to someone who was potentially work-eligible but has restrictions inherent in their eligibility  F-1, J-1, H-1, etc.
• The SSN is not invalid and can be entered into the SSN box on the I-9 form (and used for W-2/1042-S reporting)
• The individual needs to show other proof of employment eligibility for Section 2 of the I-9 that does not included the SSN card, itself.

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SPT -- Substantial Presence Test

The IRS uses the substantial presence test to determine U.S. tax residency. A foreign national who satisfies the substantial presence test is taxed as a resident alien. The test is run after adding visa and immigration status records for an individual, and after making any changes to the individual's immigration status, days away from the U.S., or other corrections to existing information.

To Explain:

1. The SPT is an IRS formula used to determine if a person has been in the US long enough to be taxed as a resident alien.
   
   
   
2. Formula is a total of 183 days to be considered a US resident for tax purposes only
• Must be in US for 31 days during the current year
• 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
1. All the days you were present in the current year, and
2. 1/3 of the days you were present in the 1st year before the current year, and
3. 1/6 of the days you were present in the 2nd year before the current year
   
   
   
3. Accounts Payable payments:
• Resident aliens, like US citizens, are not taxed upfront. They receive a 1099 at the end of the year. (i.e. they meet the SPT of 183 days)
• Nonresident aliens are taxed upfront, unless a tax treaty applies. (i.e. they do not meet the SPT of 183 days)
  
  
  
4. A foreign visitor is treated as present in the United States on any day physically present in the country, at any time during the day.
   
   
   
5. Transit exception to the SPT: Do not count days when in the US for less than 24 hours, when in transit between two places outside the US.
   
   
   
6. Visa exceptions from the SPT:
• A teacher or trainee temporarily present in the United States under a "J " or "Q " visa, who substantially complies with the requirements of the visa
• A student temporarily present in the United States under an "F, " "J, " "M, " or "Q" visa, who substantially complies with the requirements of the visa
  
  
  
7. Closer Connection Exception to the SPT:
• Are present in the United States for less than 183 days during the year
• Maintain a tax home in a foreign country during the year
• Have a closer connection during the year to one foreign country in which you have a tax home than to the United States. For determining whether a foreign visitor has a closer connection to a foreign country, the tax home must also be in existence for the entire current year, and must be located in the same foreign country for which the visitor is claiming to have a closer connection.
• Establishing A Closer Connection
1. The country of residence designated on forms and documents
2. The types of official forms filed (Form W-9, W-8BEN or W-8ECI)
3. The location of: permanent home; family; personal belongings; current social, political, cultural, or religious affiliations; business activities (other than those that constitute the tax home); jurisdiction in which a driver's license is held; voter jurisdiction
• To claim the closer connection exception file Form 8840 (Closer Connection Exception Statement for Aliens)
  
  
  
8. Closer Connection Exception for Students: Even though a foreign student may pass the substantial presence test, an exception exists in U.S. law which would allow the foreign student to continue to be treated as a nonresident alien.
• Most students fail the closer connection test (because they are in the US for more than 183 days, and their tax home is not located outside of the US)
• The exception set forth in I.R.C. § 7701(b)(5)(D) and (E) and in Treas. Reg. § 01.7701(b)-3(b)(7)(iii) is available only to alien students (not teachers / researchers, etc.), and contains four requirements for its application:
1. does not intend to reside permanently in the United States;
2. has substantially complied with the immigration laws and requirements relating to his student nonimmigrant status;
3. has not taken any steps to change his nonimmigrant status in the United States toward becoming a permanent resident of the United States; and
4. has a closer connection to a foreign country than to the United States
• To claim the exception, attach Form 8843 to Form 1040NR-EZ along with an attachment explaining the students eligibility for the closer connection exception. An IRS response should be presented to the Payroll Office.

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SS-5 -- Social Security Number Application

A nonresident alien may obtain a Social Security number only if she/he is (1) engaged in a trade or business in the United States, and (2) required to file a U.S. tax return.

To Explain:

1. The IRS requires a Social Security number for nonresident aliens who receive a salary or wages as an employee of the University of Richmond. If a worker has applied for, but has not yet received a social security number, the employer must request and keep on file the following information: worker's full name, address, date of birth, place of birth, father's full name, mother's full maiden name, gender and date person applied for the SSN.
   
   
   
2. An alien who is eligible for employment or self-employment is also is also eligible for an SSN.
   
   
   
3. The application form is a SS-5 (Application for a Social Security Card). The application must be filed in person with the Social Security Administration (SSA).
   
   
   
4. The ruling is not based on eligibility to work, it is based on the requirement of the withholding agent (University of Richmond) to report to the IRS all income paid to individuals who are paid as employees or independent contractors.
   
   
   
5. A Social Security number, once assigned, is valid for life.
   
   
   
6. A Social Security number digit configuration is ###-##-####.
   
   
   
7. The IRS requires a Social Security (or ITIN number) to offer a tax treaty to an individual.
   
   
   
8. When foreign workers apply for SSNs, the SSA verifies their documents directly with the Department of Homeland Security (DHS) via E-Verify. Most applications are verified immediately, but there can be delays. This process is necessary because the SSA has taken extra steps to ensure the integrity of SSNs. The changes the SSA has made may cause a delay up to several weeks in the receipt of an SSN card. The employee may work while the SSN application is in process.
   
   
   
9. An individual should wait at least 10 days after arriving in the US before applying for a SSN and the individual must be planning to be in the US for 14 more days after the application for an SSN. The individual should also report first to UR before applying for an SSN. This allows the Social Security Administration time to verify the individual's immigration status with the Department of Homeland Security.
   
   
   
10. A UR employee may begin work and be paid if the I-9 paperwork has been completed in the Office of International Taxation.  The individual does not need to have the SSN in hand to start work or to be paid.
    
    
    
11. An individual may not apply for an SSN until he has started working.  The Social Security Administration computer systems can not "future date" an employment start date.   The application process can take from two weeks to three months.
    
    
    
12. Lawfully admitted noncitizens can get many benefits and services without a Social Security number. You do not need a number to conduct business with a bank, register for school, or apply for educational tests. You cannot get a Social Security number for the sole purpose of obtaining a driver's license or a credit card.
    
    
    
13. If an individual's employment start date is shown to be more than 30 days in the future from the date of SS-5 is filed, the SSA will verify with the employer that the student has been hired and that the start dates is accurate.
    
    
    
14. If the individual will not be in the US long enough to receive the SSN after the application is filed, the IRS will not issue an SSN to aliens who are not in the US at the time they are issued.
    
    
    
15. Once received, the individual must bring the social security card to OIT so that it can be copied and placed in the student's records and recorded in Banner with Student Employment.
    
    
    
16. The student may authorize the SSA to release his SSN to UR (as the employer.) To do this the student must sign a consent form. The form, SSA-7028, allows for the SSA to receive written notice of the SSN assigned. Note: The student must complete Part B of the SSA-7028.

In Order to Proceed:

1. Visit the Office of International Taxation at UR to gather together your forms and fill out the SS-5 application.
   
   
   
2. Required Forms:
• All applicants:
1. Completed SS-5 application
2. Passport
3. I-94 with Customs & Boarder Protection entry stamp
4. If applicable, work permit from DHS (I-766 or I-688B)
5. Letter from Office of International Education stating you are eligible to work
• F1 or M1 students ONLY:
1. Must show I-20 Form (page 3 must be completed and signed by a designated school official.)
2. Must show evidence of that employment -- JAF (job approval form)
• J1 or J2 exchange visitors ONLY:
1. Must show Form DS-2019
2. Letter from your sponsor. The letter should be on sponsor letterhead with an original signature that authorizes your employment.
   
   
   
3. Apply in person at the Social Security Administration office.  Click here for directions and information.  All applications should bring the following documents with them:
• Passport
• Visa
• I-94 Card
• Letter from International Education
• Letter (on UR letterhead and signed by individual's supervisor) stating that the individual has been hired to work on campus
• Faculty -- appointment letter
• Staff -- HR letter
• Students -- Also signed by International Taxation
  
  
  
4. Request a receipt from the Social Security Administration as proof of application. (Send a copy of this receipt to Office of International Taxation to be kept on file.)
   
   
5. Once the Social Security card is received, bring the original card to the Office of International Taxation so that a copy can be made for your file.  (Tax treaties, if applicable, will be awarded at this point.)

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W-4 -- Federal Payroll Tax Withholding (New Federal Witholding Rules on the Wages of NRA Employees)

The IRS requires that all employers withhold federal taxes from the income of nonresident employees. Any compensation received, including grant funds, for services performed is considered taxable income. On October 31, 2005 the IRS issued new rules for for withholding on wages of nonresident alien employees. The goal of the new rules is to provide withholding on wages that more closely approximates an NRA's income tax liability. The new rules accomplish this with new Form W-4 rules and special payroll computations for withholding on wages.

NOTE: If an income tax treaty exists, no tax withholding may be required based upon the treaty agreement. Determination of a tax treaty will be made by the Office of International Taxation.

To Explain:

1. Whether someone is a NRA employee depends upon the results of the 183-day residency formula -- the Substantial Presence Test. This is determined by listing the immigration status/history and all days in the U.S. over a number of years.
   
   
   
2. The new ruling avoids overwithholding on NRA employees whose pay is less than the personal exemption amount.  For further details, including a calculation chart, see a report from Paula Singer, Esq. at Windstar.
   
   
   
3. The withholding will be lower based on the new Form W-4 because an NRA does not have to include an additional withholding amount.
   
   
   
4. The W-4 remains valid until facts change that would make it invalid. It is not necessary to collect a new W-4 every year.
   
   
   
5. The specifics NRA rules for completing the Form W-4
• Must not claim exemption from withholding
• Must use single status, even if married
• Must claim only one allowance
• Must write "NRA" on the dotted line on Line 6
• Additional withholding may be withheld at the NRA's request
  
  
  
6. The "NRA" indication on Line 6 of Form W-4 notifies the payroll computer program to add an additional amount to the wages of an NRA employee to offset the assumed standard deduction that is incorporated into the wage tables.
• The wage amount varies by pay period (weekly, bi-weekly, monthly, etc.)
• The amounts DO NOT affect income for Form W-2 purposes (the form used to report annual income at year end)
• Nor do the amounts affect Social Security, Medicare (FICA), or Federal Unemployment tax (FUTA)
  
  
  
7. The Federal Insurance Contributions Act (FICA) imposes two taxes, one on the employee and the other on the employer. These taxes are known as FICA taxes or Social Security taxes. The FICA taxes finance the old age/survivors/disability insurance and the Medicare insurance provided under the Social Security Act.
• The FICA tax is calculated based on the amount of wages paid to an employee with respect to employment. (Note: Employers are required to pay matching amounts.)
1. The tax for old age/survivors/disability portion of FICA is 6.2%.
2. The Medicare portion of FICA is 1.45%.
• FICA, as a general rule, is applicable to salary or wages made by U.S. employers to nonresident alien employees, unless one of the exemptions discussed below applies:
1. Exemption under Internal Revenue Code Sec. 3121 (b)(19) requires that an individual must be:
• A nonresident Alien (a nonresident for tax purposes)
• Present in the U.S. under an F-1, J-1, M-1 or Q-1 visa
• Performing services in accordance with the visa's issuance
2. Exemption under Internal Revenue Code Sec. 3121 (b)(10)
• A student who is enrolled and regularly attending classes.
• Applies to nonresident alien students and US students
3. Social Security "Totalization" Agreement is an agreement between the U.S. and another country that eliminates dual Social Security Coverage and taxes for social security programs.
   
   
   
8. If an NRA's total wages are less than the personal exemption amount ($3,500 for 2008 and $3,650 for 2009) there will be ZERO federal withholding under the new rules. If the only US source income for the year is wages that are less than $3,500 (2008), an NRA does not have to submit a Form 1040NR-EZ.
   
   
   
9. If an NRA's total wages exceed $3,500 (2008), the NRA must file a 1040 NR-EZ and report the wages. Taxes, interest and penalties may be owed if the NRA withholding procedure listed above was not followed.
   
   
   
10. NRAs are in most instances not allowed to claim additional personal exemptions. The IRS expects employers of NRAs to apply due diligence over the W-4s of NRAs. If the W-4 is filled out incorrectly, it is deemed invalid.
    
    
    
11. An NRA individual's eligibility to claim exemptions is based on the individual's status, not that of their spouse or child. (For example, a NRA individual from Turkey who has a child who is a US citizen can't claim the child on this W-4.)
    
    
    
12. US citizens and resident alien taxpayers are allowed to claim personal exemption for children who meet the requirements of being dependents as specified in section 151. One of the requirements is that the dependent be a US citizen, US resident, US national or a resident of Canada or Mexico.
    
    
13. A sample W-4 can be found in the forms section of this website.

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VA-4 -- Employee's Virginia Income Tax Withholding Exemption Certificate

The Commonwealth of Virginia law imposes individual income tax filing requirements on virtually all Virginia residents, as well as on nonresidents who receive income from Virginia sources. The law requires that all employers withhold tax from the income of nonresident employees, if federal law requires the withholding. Any compensation received for services performed is considered taxable income.

To Explain:

1. Taxable income:
• Employment wages
• Non-qualified scholarship money
• Grant funds (considered by the IRS to be taxable income, if a service is performed in order to receive those funds)
  
  
  
2. Virginia law does not make a designation of resident aliens and nonresident aliens as special statuses for tax filing purposes. Therefore, a resident or nonresident alien is subject to the same Virginia residency provisions as all other filers. If an NRA is required to file a federal income tax return, and the NRA meets the definition of a Virginia resident, part-year resident or nonresident and other filing requirements, the NRA must file a Virginia tax return.
   
   
   
3. NRA students are subject to the same rules for residency and filing requirements in Virginia as all other filers.
   
   
   
4. If an NRA is exempted from federal withholding by tax treaty, the NRA is also exempted from withholding in Virginia.
   
   
   
5. The Virginia income tax withholding exemption certificate is the Form VA-4. The rules for completing the VA-4 for NRAs is as follows:
• Must not claim exemption from withholding
• Must use single status, even if married
• Must claim only one allowance
• Additional withholding may be withheld at the NRA's request
  
  
  
6. The correct method for filing your income tax return and reporting Virginia taxable income depends on your residency status.
• Resident:
1. A person who lives in Virginia, or maintains a place of abode here, for more than 183 days during the year, or who is a legal (domiciliary) resident of the Commonwealth is considered a Virginia resident for income tax purposes. (Note: The period of residency does not have to be 183 consecutive days.)
2. Residents file Form 760 at the end of the tax year
• Nonresident:
1. A person who is not a resident or part-year resident, but who receives taxable income from Virginia sources is a nonresident for income tax purposes.
2. Nonresidents file Form 763.
• Part-Year Resident:
1. A person who moves into Virginia during the year with the intent of becoming a resident, or a person who moves out of Virginia during the year to become a resident of another state, is a part-year resident for income tax purposes.
2. Part-year residents generally file Form 760PY
   
   
   
7. If an NRA's total wages are less than the personal exemption amount there will be ZERO Virginia withholding. The following rules must be met:
• A VA-4 must be filed with University of Richmond for each calendar year for which an NRA claims exemption from Virginia withholding.
• NRA must not have had liability for Virginia income tax in the previous calendar year
• Virginia adjusted gross income is expected to be less that $7,000
  
  
  
8. A sample VA-4 can be found in the Forms section of this website.

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FICA

The Federal Insurance Contributions Act (FICA) tax, a kind of payroll tax, is a US employment tax imposed in an equal amount on employees and employers to fund federal programs for retirees, the disabled, and children of deceased workers. The FICA tax pays for Social Security and Medicare. The Federal Insurance Contributions Act is codified as 26 U.S.C. ch.21.

To Explain:

1. Social Security benefits include old-age, survivors, and disability insurance. Medicare is the hospital insurance portion.
• Prior to the Great Depression (1930's), economic problems were great hazards to working-class Americans.
1. The US had not federal-government-mandated retirement savings; consequently, for many workers, the end of their work careers was the end of all income.
2. The US had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries; consequently, for most people, a disabling injury meant no more income.
3. The US had no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.
4. The US had no federal-government-mandated health insurance for the elderly; consequently, for many workers, the end of their work careers was the end of their ability to pay for medical care.
• In the 1930's, the New Deal introduced Social Security to rectify the first three problems (retirement, injury-induced disability or congenital disability.) It introduced the FICA tax as the means to pay for Social Security.
• In the 1960's, Medicare was introduced to rectify the fourth problem (heath care for the elderly.)
  
  
  
2. For 2008:
• FICA tax is imposed only on the first $102,000 of gross wages. The limit, known as the Social Security Wage Base, goes up each year based on average national wages.
1. The employees share of the Social Security portion of the tax is 6.2% of gross compensation up to the limit of $102,000 of gross wages.
2. The employee's share of the Medicare portion is 1.45% of wages with no limit.
3. The employer is also liable for separate 6.2% and 1.45% Social Security and Medicare taxes, respectively.
4. Self-employed people are responsible for the entire FICA percentage of 15.3%, since they are both the employer and the employee.
5. The tax is not imposed on investment income (such as interest and dividends.)
• The total Social Security tax 12.4% and the total Medicare tax 2.9% of wages.
  
  
  
3. A special case in FICA regulations includes exemption for various categories of employment:
• On-campus student employment up to 20 hours a week (40 hrs during summer vacations)
• Off-campus student employment allowed by USCIS (CPT or OPT off-campus employment is not FICA exempt)
• Practical Training student employment on or off campus.
• Employment as professor, teacher or researcher.
• Employment as a physician, au pair, or summer camp worker.
  
  
  
4. IRC 3121(b)(19):
• Nonresident Alien students, scholars, professors, (etc) are exempt on wages paid to them for services performed within the United States as long as such services are allowed by USCIS for these nonimmigrant statuses, and such services are performed to carry out the purposes for which such visas were issued to them.
1. Alien student or scholar must be temporarily present in the US in F-1, J-1, M-1 or Q status
2. Alien students or scholars employment must be authorized under the immigration law for his particular nonimmigrant status
3. Alien student or scholar must be a nonresident alien under the tax residency rules of IRC 7701(b)
• Applies regardless of employer as long as all the restrictions are met.
• FICA exemption is valid during the school year
• FICA exemption is valid during the summer months (school not in session)
• All practical training is covered as is compensation for work under an EAD for economic reasons. (Note: the student FICA exemption does not apply during OPT, the NRA FICA exemption does apply.)
• Based on the date when the income is paid not when it is earned. This is because individuals are on a cash basis for determination of the income tax implications of their pay.
• May be enrolled at another institution and working at UR and still receive the NRA FICA exemption.
• Once exemption under this rule is exhausted, default to the US student exemption.
  
  
  
5. IRC 3121(b)(10):
• All students (US citizens or otherwise) enrolled full-time in a university and working part-time for the same university are exempted from FICA payroll taxes, so long as their relationship with the university is primarily an educational one. (NOTE: Off-campus employment is not FICA exempt.)
• Immigration status and tax residency are irrelevant -- the determination of eligibility is the same for everyone and is based on enrollment, the employee's primary relationship to the school and only applies to wages earned from the school where the student is regularly enrolled.
• FICA exemption is valid during the school year only
• FICA exemption is not valid during the summer months (school not in session)
  
  
  
6. Limitations on Exemption:
• The exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 nonimmigrant status.
• The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
• The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status.
• The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who become resident aliens.
• International students who are resident aliens for tax purposes are not exempt from FICA during the summer months (i.e. when school is not in session.)
  
  
  
7. Substantial Presence Test (SPT):
• J-1, Q-1, Q-2 Scholars/Professors: Considered to be "exempt individuals" (i.e., exempt from counting days of presence in the United States (under the Substantial Presence Test) during the first two calendar years of their physical presence in the US
• F-1, J-1, M-1, Q-1 or Q-2 Students: Considered to be exempt individuals during the first five calendar years of their physical presence in the United States (under the Substantial Presence Test).
• Nonresident Alien Status (by the SPT):
1. Foreign scholars/professors: First 2 years
2. Foreign students: First 5 years
• Resident Alien for Tax Purposes
1. The IRS audit position is that foreign national employees who become resident aliens in the tax year should be treated as residents from the beginning of the year to assure collection of FICA taxes.
2. Foreign scholars/professors:  On January 1st of 3rd calendar year in the US
3. Foreign students:  On January 1st of the 6th calendar year in the US
   
   
   
8. International students who are resident aliens for tax purposes:
• Not exempt from FICA during the summer months (when school is not in session)
• Exempt from FICA during school year based on IRC 3121(b)(10) rather than IRC 3121 (b)(19)
  
  
  
9. Change in visa status:
• Those in F-1, J-1, M-1, Q-1 or Q-2 status who change to a nonimmigrant status other than F-1, J-1, M-1, Q-1 or Q2 become liable for social security/Medicare taxes.
• In most cases this happens on the very day of the change of status.
• However, once the individual makes known that she/he is planning a change in status (applying for a "green card", for example), the Office of International Taxation must start taking FICA from the person's paychecks.
  
  
  
10. FICA and Other Visa Types:
• Teachers, trainees, and researchers in H-1b status are liable for social security/Medicare taxes from the first day of U.S. employment, regardless of whether they are nonresident or resident aliens, and regardless of whether their wages may or may not be exempt from federal income taxes under a tax treaty.
• Foreign scholars, teachers, researchers, or trainees who arrive in the United States in O-1 status or TN status (from Canada or Mexico under the NAFTA treaty) are fully liable for U.S. social security/Medicare taxes if they are employed on the payroll of the university or other employer, regardless of whether or not they are resident or nonresident aliens unless the provisions of a Totalization Agreement relieve such aliens from liability for U.S. social security/Medicare taxes.
  
  
  
11. Totalization Agreements:
• The United States has entered into agreements with several nations called Totalization Agreements for the purpose of avoiding double taxation of income with respect to social security taxes.
• As of this time, the following nations have entered into Totalization Agreements with the United States: Australia, Austria, Belgium, Canada, Chile, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea (South), Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom.
• Copies of the Totalization Agreements may be obtained from the Social Security Administration.
• Any alien who wishes to claim an exemption from U.S. Social Security taxes and Medicare taxes because of a totalization agreement must secure a Certificate of Coverage from the social security agency of his home country and present such Certificate of Coverage to his employer in the United States, according to the procedures set forth in Revenue Procedures 80-56, 84-54, and Revenue Ruling 92-9.
  
  
  
12. If FICA is withheld in error, the recommended approach is to have the employer obtain the refund for both the employee and employer shares of FICA. The employer will file Form 941 for the quarter in which the error is discovered as long as the year for payment is still an open year. If an employee files for a FICA refund, the NRA uses Form 843. The IRS will eventually request the employer to complete an amended Form 941 and Form W-2C to reflect the change for the employer share as well.
    
    
    
13. FICA Exemption:
• Person must be enrolled full-time and regularly attending classes to be given the status of "student".
• Student vs. employee status should be determined at the start of each academic term.
• The educational aspect of the relationship between the employee and the employer, as compared to the service aspect, must predominate. (Incident to and for the purpose of pursuing a course of study.)
• An employees normal work schedule is not affected by increases in hours worked caused by work demands unforeseen at the start of an academic term.
• If the student is scheduled for 20 hours and consistently works more than 40 hours, the amount of time actually worked is taken into account in determining whether or not the employee qualifies as a student.
• A full-time employee is an employee who is considered a full-time employee based upon the employer's standards and practices.
• An employee's work schedule during academic breaks is not considered in determining whether the employee's normal work schedule is 40 hours or more per week.

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W-8BEN

Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for US Tax Withholding, is used by a foreign person to establish both foreign status and beneficial ownership, and to claim income tax treaty benefits with respect to income other than compensation for personal services.

To Explain:

1. The purpose of the W8-BEN is to:
• Establish that someone is a foreign person (certificate of foreign status.) It is used at audit time to support a 30% tax rate.
• Claim that an NRA is the beneficial owner of the income for which Form W-8BEN is being provided.
• Claim a reduced rate of, or exemption from withholding as a resident of a foreign country with which the United States has an income tax treaty.
  
  
  
2. Use the W8-BEN:
• When NRA is not eligible for treaty benefits for compensation income.
• To claim a treaty exemption when a foreign artist is paid royalties.
• When NRA is given a prize or award.
  
  
  
3. Do not use the W8-BEN:
• To claim exemption from withholding on personal services performed in the United States. (Use Form 8233.)
• To receive a nonqualified scholarship when not granted treaty benefits, the form is not technically required.
  
  
  
4. The W8-BEN is the certificate of foreign status for all types of income except for individuals with income from independent personal services. (That is Form 8233.)
   
   
   
5. The W8-BEN form, after being signed by an NRA, should be kept on file in the Office of International Taxation. This is the NRA's certificate of foreign status.
   
   
   
6. Length of validity of the W8-BEN:
• With a TIN, it is effective indefinitely or until the facts change provided that it is used at least annually for Form 1042-S reporting.
• Without a TIN it is good for three taxable years from the date of the form.
  
  
  
7. If a foreign student works for UR outside of the US, obtain a W-8BEN with the foreign address. (Also, the withholding and Form W-2 reporting should be stopped.)
   
   
   
8. Federal law states that a foreign student who is an NRA should file Form W-8BEN with his U.S. bank, U.S. savings and loan association, U.S. credit union (including both federal and state chartered credit unions), or U.S. insurance company.
   

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W-9 -- Request for Taxpayer Identification Number and Certification

Form W-9 is used in the US income tax system by a third party who must file an information return with the IRS. It requests the taxpayer identification number of the taxpayer. The form is never actually sent to the IRS, but is maintained on file for verification purposes.

To Explain:

1. Internationals will be asked to sign a W-9 in the year they become resident aliens for tax purposes. (Before that the W-8BEN is signed.)
   
   
   
2. Purposes of the W-9:
• Obtain a taxpayer identification number
• Certificate of US status
• Claim exemption from withholding under a treaty for a resident alien
• The W-9 replaces the Form 1078 that was used for a foreign national to declare US tax residency status to a payer.
  
  
  
3. Treat the individual for withholding and reporting purposes in the same manner as a US citizen.
   
   
   
4. If you are making a payment to a foreign national who would be taxed at 30% if the individual were a nonresident alien, you should have the signed From W-9 for audit purposes.
   
   
   
5. Note that the IRS now requires treaty claoms for exemptions from withholding of resident aliens to be made on Form W-9.

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