Guide to Global Payroll Management - 2020 - 2-13

Federal Income Tax Withholding for Aliens
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Step 4(b). Itemized deductions and adjustments to income may be limited for
nonresident aliens (see IRS Pub. 519 for more information). Nonresident aliens
who expect to claim itemized deductions and/or adjustments to income (such
as the student loan interest deduction) should add their itemized deductions
and adjustments to income and enter the amount in Step 4(b).

Step 4(c). Nonresident aliens who would like to have an additional amount
withheld should enter the amount in Step 4(c).

Step 4(c). Nonresident aliens should write "nonresident alien" or "NRA" in the
space below Step 4(c).

Exempt from withholding. Nonresident aliens may not claim exempt from withholding in the space below Step 4(c).

Employers hiring nonresident alien employees should instruct the new employees to
complete Form W-4 in accordance with these procedures. Employers maintaining electronic
Form W-4 systems should make sure their systems allow employees to identify themselves
as nonresident aliens. Also, employers using substitute forms should make sure their forms
comply with these procedures. The IRS has published Notice 1392, Supplemental Form W-4
Instructions for Nonresident Aliens, to help them complete Form W-4.
Special withholding calculation rules.15 Employers are required to calculate income
tax withholding on wages of nonresident alien employees (except for students and business
apprentices from India) using a special procedure. Under this procedure, the employer adds
an amount to the wages of the nonresident alien employee solely for purposes of calculating the income tax withholding for each payroll period; the specific amount depends on the
payroll period and can be found in IRS Publication 15-T (Circular E), Federal Income Tax
Withholding Methods. The added amount is not income or wages to the employee, does not
affect federal income, social security, Medicare, or FUTA (federal unemployment) tax liability
for the employer or the employee, and should not be reported as income or wages on the
employee's Form W-2, Wage and Tax Statement.
Because Publication 15-T allows federal income tax withholding to be calculated based on
pre-2020 Forms W-4 and 2020 Forms W-4, there are two tables. Table 1 is used if the nonresident alien employee was first paid wages before 2020 and has not submitted a Form W-4
for 2020 or later. Table 2 is used if the nonresident alien employee has submitted a Form W-4
for 2020 or later or was first paid wages in 2020 or later. Employers determine the income tax
to be withheld by applying the appropriate withholding tables to the sum of the wages paid for
the payroll period plus the additional amount. Adding this amount will take into account the restrictions on a nonresident alien's filing status, the inability to claim the standard deduction on
their personal tax returns, and the limitation on claiming certain tax credits and deductions.
15. Notice 2005-76, 2005-46 IRB 947

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Guide to Global Payroll Management - 2020

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