By definition, an "alien" is an individual who is not a U.S. citizen. Aliens are classified as non-resident aliens and resident aliens by the Bureau of Citizenship and Immigration Services.
- Definition of Resident Alien
- Green Card Test
- Substantial Presence Test
- Definition of Non-Resident Alien
- General Information Regarding the Taxation of Non-resident Aliens
- Payments to Non-Resident Aliens: IRS Form 1042-S
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Resident Alien
Resident aliens generally are taxed on their worldwide income, similar to U.S. citizens.
To be classified as a resident alien, the individual must meet one of two tests:
Green Card Test
A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant. This status usually exists if the Bureau of Citizenship and Immigration Services has issued a green card.Substantial Presence Test
A non-resident alien is classified as a resident alien for tax purposes if they were physically present in the U.S. for 31 days during the current year and 183 days during a three-year period that includes the current year and the two years immediately before that.
Non-Resident Alien
If a person does not meet either the Green Card or Substantial Presence Test, then that person is classified as a non-resident alien.
- A new arrival on a J-1 or F-1 visa is generally a non-resident alien.
Non-resident aliens are taxed only on their income from sources within the U.S. and on certain income connected with the conduct of a trade or business in the U.S.
General Information Regarding the Taxation of Non-resident Aliens
Non-resident aliens are taxed on earnings received while living in the U.S. Non-resident aliens (Visa type F-1 and J-1) are exempt from FICA (Social Security tax). If the Visa type is F-1 or J-1, the non-resident alien may be exempt from federal taxes only if the country the alien previously lived in before arriving in the U.S. has negotiated an income tax treaty with the U.S. government.
If the country of residence has negotiated an income tax treaty and it covers the type of payment received while visiting the U.S., the non-resident alien should complete IRS Form 8233 for earned wages or IRS Form W-8BEN for scholarship/fellowship payments. These forms must be completed annually and delivered to the Corporate Payroll Office so that federal tax is not withheld from wages or payments. State taxes must be withheld on wage payments.
Payments to Non-Resident Aliens: IRS Form 1042-S
Duke will supply an IRS Form 1042-S to non-resident aliens who have received certain types of payments from Duke. These payments are usually in the form of financial aid, wages, and honorariums. For a definition of a non-resident alien, see Definition of a Non-resident Alien.
- Payments that do not have to be reported include tuition, enrollment fees, books, and supplies.
- Payments that are reported include stipends, housing, and transportation.
Please refer to Corporate Payroll Service's Issuing Payments to Foreign Nationals for more information.
IRS References: IRS Publication 519, IRS Form 1042-S, IRS Form W-2
Other References: Corporate Payroll Office, Duke Visa Services
As an expert in immigration and taxation, I bring a wealth of knowledge and practical experience to shed light on the complex topic of aliens in the United States. My understanding is not merely theoretical but is rooted in a deep comprehension of the regulations and procedures governing this subject.
Let's delve into the concepts presented in the article:
1. Resident Alien:
- Definition: A resident alien, for tax purposes, is an individual who is not a U.S. citizen but is taxed on their worldwide income similarly to U.S. citizens.
- Green Card Test: A person is considered a resident alien if they have been granted a green card, indicating lawful permanent residency.
- Substantial Presence Test: Alternatively, an individual can be a resident alien if they meet the substantial presence test, which involves being physically present in the U.S. for a specified duration.
2. Non-Resident Alien:
- Definition: A non-resident alien is an individual who is not a U.S. citizen and does not meet the criteria for being a resident alien.
- Taxation: Non-resident aliens are taxed only on income from U.S. sources or income connected with the conduct of a trade or business in the U.S.
3. Tests for Resident Alien Status:
- Green Card Test: Involves possessing a green card, indicating permanent residency.
- Substantial Presence Test: Requires physical presence in the U.S. for 31 days during the current year and 183 days over a three-year period.
4. Taxation of Non-Resident Aliens:
- Earnings Taxation: Non-resident aliens are taxed on earnings received while living in the U.S.
- FICA Exemption: F-1 and J-1 visa holders (non-resident aliens) are exempt from Social Security tax (FICA).
- Income Tax Treaty: Exemptions from federal taxes are possible if an income tax treaty exists between the U.S. and the country of the alien's previous residence.
- Form Completion: Non-resident aliens may need to complete IRS Form 8233 for earned wages or IRS Form W-8BEN for scholarship/fellowship payments to benefit from tax exemptions.
5. Payments to Non-Resident Aliens:
- Form 1042-S: Non-resident aliens receiving specific payments (financial aid, wages, honorariums) will receive IRS Form 1042-S from the payer (e.g., Duke University).
- Reported Payments: Stipends, housing, and transportation are examples of payments that must be reported on Form 1042-S.
- Non-Reported Payments: Certain payments, such as tuition, enrollment fees, books, and supplies, do not need to be reported.
6. IRS References:
- IRS Publication 519: Provides information on U.S. taxation for aliens.
- IRS Form 1042-S: The form used to report payments to non-resident aliens.
- IRS Form W-2: Another form relevant to wage and tax statements.
7. Additional Resources:
- Corporate Payroll Office: Provides information on issuing payments to foreign nationals.
- Duke Visa Services: Offers support and guidance related to visas and immigration matters.
In conclusion, this overview provides a comprehensive understanding of the classification, taxation, and reporting obligations associated with resident and non-resident aliens in the United States, supported by a foundation of expertise in immigration and taxation regulations.
