Payroll and Employment Tax for Foreign Nationals

All visitors to the U.S. are considered to be either resident alien or nonresident alien visitors for tax purposes.  A visitor typically enters the U.S. as a nonresident alien, and under an F-1 or J-1 student visa will remain a nonresident for tax purposes for the first 5 calendar years of their stay; after which, they will automatically transition to being residents for tax purposes.  The International Compensation and Taxation (ICT) workgroup at NCSU determines this status in its tax assessment.  It uses your complete travel history (beyond your current visa stay) to make this important determination.  Please see the IRS website on the Substantial Presence Test (SPT) for more information.

Visiting students under an F-1 or J-1 student visa are eligible to receive scholarships. Any amount of the scholarship that exceeds the cost of tuition or fees (the unqualified portion) is potentially subject to 14% withholding.  Depending on the country of origin, a visitor may be eligible for a tax treaty benefit that can reduce the amount of tax withheld. 

NCSU is required to withhold tax on the unqualified portion of these payments and report these amounts to the IRS.  Please see Publication 515 for NC State’s obligation with respect to your scholarship payment.  https://www.irs.gov/pub/irs-pdf/p515.pdf

Note: Scholarships are payable through your student account.  If the International Compensation and Tax (ICT) workgroup has not already performed a tax assessment for you, you will automatically be taxed at that 14% default rate of withholding even if you would otherwise be eligible for tax treaty benefits.

For nonresident aliens who receive scholarships that are taxed at 14%, you will receive a Form 1042-S at yearend that shows this withholding or any amount of a scholarship that is covered by a tax treaty.

If you have additional questions, please email ICTquestions@ncsu.edu.

All visitors to the U.S. are considered to be either resident alien or nonresident alien for tax purposes.  A visitor typically enters the U.S. as a nonresident alien, and under an F-1 or J-1 student visa will remain a nonresident for tax purposes for the first 5 calendar years of their stay; after which, they will automatically transition to being residents for tax purposes.  The International Compensation and Taxation (ICT) workgroup at NCSU determines this status in its tax assessment.  It uses your complete travel history (beyond your current visa stay) to make this important determination.  Please see the IRS website on the Substantial Presence Test (SPT) for more information.  Nonresident aliens for tax purposes working properly in-status are generally exempt from paying FICA taxes.

Visitors under an F-1 or J-1 student visa are eligible to work only on campus.  They must have a tax assessment performed by ICT in order to determine tax residency as well as determine if a tax treaty may apply.  A tax treaty is an agreement between the U.S. and certain participating countries that reduces the amount of withholding its visitors would otherwise be subject to while working in the U.S.  For example, if a tax treaty exists between the U.S. and your country for $3,000, then NCSU could exempt $3,000 of withholding during the calendar year from your income when determining your pay from employment.

Note: A tax treaty (Form 8233) is only good for the current calendar year and it is possible it would be renewed for the upcoming calendar year based on ICT’s analysis.  We will forward your form to you to renew and upload to our database.

Please note that if there is a tax treaty available, that it need not begin with your first paycheck.  NCSU can only “turn on” tax treaty benefits after we have received your signature on the form ICT would provide for you.  Again, ICT will need to perform a tax assessment to see if you are eligible.  To see if your country is a tax treaty participating country, here is IRS Publication 901.

All NCSU employees who are nonresident aliens for tax purposes who have employment income will be subject to the special nonresident alien withholding rule.  This is a required method of calculating income by including a figure along with taxable income that is used in the computation of withholding.  For the details on NCSU’s obligation for this withholding, see IRS Publication 15-T.  

Forms you may receive:

Form W-2  This form shows all employment income paid to you and amounts of federal and state income withheld, plus any FICA withheld.  Unless 100% of your income was covered under a tax treaty, you will receive Form W-2 which you will need to file your taxes.

Form 1042-S  This form shows all employment income covered under a tax treaty, however, if you have earned more income than the treaty maximum, that income will be reported on Form W-2.  For example, there is a treaty between your country and the U.S. that exempts $3,000 in income, and you are paid $4,000 during that calendar year.  Three thousand dollars would be reported on Form 1042-S, but the remaining amount will be shown on Form W-2.

Form 1098-T   This is a form that shows tuition paid and scholarships received only if you have been in the U.S. long enough to be considered a resident alien for tax purposes.  You are otherwise ineligible to get this form if you are a nonresident alien for tax purposes. 

All visitors to the U.S. are considered to be either resident alien or nonresident alien for tax purposes.  A visitor typically enters the U.S. as a nonresident alien, and under a J-1 teacher or researcher designation will remain a nonresident for tax purposes for the first 2 calendar years of their stay; after which, they will automatically transition to being residents for tax purposes.  The International Compensation and Taxation (ICT) workgroup at NCSU determines this status in its tax assessment.  It uses your complete travel history (beyond your current visa stay) to make this important determination.  Please see the IRS website on the Substantial Presence Test (SPT) for more information.  Nonresident aliens for tax purposes working properly in-status are generally exempt from paying FICA taxes.

Visitors under a J-1 teacher or researcher visa are eligible to work only on campus.  They must have a tax assessment performed by ICT in order to determine tax residency as well as see if a tax treaty may apply.  A tax treaty is an agreement between the U.S. and certain participating countries that will eliminate the amount of withholding its visitors would otherwise be subject to while working in the U.S.  For example, if a tax treaty exists between the U.S. and your country, then NCSU could exempt all income tax withholding during the calendar year from your income when determining your pay from employment.

Note: A tax treaty (Form 8233) is only good for the current calendar year and it is possible it would be renewed for the upcoming calendar year based on ICT’s analysis.  We will forward your form to you to renew and upload to our database.

Forms you may receive after yearend:

Form W-2  This form shows all employment income paid to you and amounts of federal and state income withheld, plus any FICA withheld.  Unless 100% of your income was covered under a tax treaty, you will receive Form W-2 that you will need to file your taxes.

Form 1042-S  This form shows all employment income covered under a tax treaty.

Three common types of employment-based visas seen on a college campus are the H-1B, E-3, and O-1 visa.  These visa holders must maintain employment throughout their stay.  They are in most material respects taxed similarly to U.S. citizens.   (NCSU is not permitted to employ such visa holders who are sponsored by other institutions unless NCSU is taking active steps to become sponsors of the visitors itself.)

Other foreign nationals may be employed by NCSU if they have obtained an Employment Authorization Document (EAD card).  There are many EAD designations.  For example, an F-1 student who has graduated may have applied for post-completion Optional Practical Training (OPT) which would confer employment eligibility after the original program end date has expired.  EAD card holders are generally taxed similarly to U.S. citizens, also.

Form received after yearend:

Form W-2  This form shows all employment income paid to you and amounts of federal and state income and any FICA withheld.