New procedure for withholding income taxes on the wages of nonresident
alien employees.
In general, you must withhold federal
income taxes on the wages of non-resident alien employees. However, see
IRS Publication 515
for exceptions to this general rule.
For wages paid on or after January 1,
2006, you are required to apply a new procedure in calculating the
amount of federal income tax withholding on the wages of nonresident alien
employees.
Under this procedure, you add an amount as set forth in the chart below to
the nonresident alien employee’s wages solely for purposes of calculating
the federal income tax withholding for each payroll period. You determine
the amount to be withheld by applying the federal income tax withholding
tables to the amount of wages paid plus the additional chart amount. The
amount to be added to the nonresident alien employee’s wages to calculate
federal income tax withholding is set forth in the following chart:
Amount to Add to Nonresident Alien
Employee’s
Wages for Calculating Income Tax Withholding Only
| Payroll Period |
Add Additional |
| Weekly |
$51.00 |
| Biweekly |
102.00 |
| Semimonthly |
110.00 |
| Monthly |
221.00 |
| Quarterly |
663.00 |
| Semiannually |
1,325.00 |
| Annually |
2,650.00 |
The amounts added under this chart for purposes of this
procedure are added to wages solely for the purpose of calculating the
amount of federal income tax withholding on the wages of the nonresident
alien employee. These chart amounts should not be included in any box on the
employee’s Form W-2 and do not increase the federal income tax liability of
the employee. Also, these chart amounts do not increase the social security,
Medicare, or FUTA tax liability of the employer or the employee.
This procedure only applies to nonresident alien employees
who have wages subject to federal income tax withholding.
Example. An employer using the percentage method of withholding
pays wages of $500 for a biweekly payroll period to a married nonresident
alien employee. The non-resident alien has properly completed Form W-4,
entering marital status as single with one withholding allowance and
indicating status as a nonresident alien on line 6 of Form W-4.
The employer determines the
wages to be used in the withholding tables by adding to the $500 amount of
wages paid the amount of $102 from the chart above ($602 total). The
employer then applies the applicable table (Table 2(a), the table for
biweekly payroll period, single persons) by subtracting the applicable
percentage method amount for one withholding allowance for a biweekly
payroll period from $602 and making the calculations under the table.
The $102 added to wages for purposes of calculating income tax withholding
is not reported on Form W-2, and does not affect the social security tax,
Medicare tax, or FUTA tax liability of the employer or the employee.
See:
IRS Publication 515:
http://www.irs.gov/pub/irs-pdf/p515.pdf
Notice 2005-76:
http://www.irs.gov/irb/2005-46_IRB/ar10.html
2006 Form W-4:
http://www.irs.gov/pub/irs-pdf/fw4.pdf
2006 Form W-4 (Spanish):
http://www.irs.gov/pub/irs-pdf/fw4sp.pdf
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