The federal Form W-4, Employee’s Withholding Certificate, is required for all employees, even nonresidents. The federal income tax withholding tables include adjustments that apply to most foreign workers, so the income taxes withheld will not be the same as for a similarly situated U.S. citizen or tax resident. Some states have varying withholding rules for those who are not tax residents. Various fringe benefits employers offer their nonresident alien employees and their families can be taxable. Many times, these things are “assumed” to be not taxable, which is wrong. For example, an employer paying for the cost of an employee’s visa can be tax-free, but if the employer also pays for the spouse and children’s visas, that is taxable. Other taxable items to monitor include (but are not limited to): moving expenses, laundry, rental/leased car, rental assistance, closing costs on buying a home, private school for children, and English speaking lessons.
Similar to moving expenses, other fringes such as imputed Group Term Life Insurance, the personal use of company cars and of company aircraft all can have differing tax treatment at the federal level compared to some states. Payroll must also watch for specifically excluded items in the federal code that are taxable on the state side, like tax-free contributions to many deferred compensation plans (Pennsylvania), or contributions to Health Savings Accounts (California). nonresident aliens to work in the U.S. have a myriad of employment tax considerations, and many trip up on one requirement or another. Here are some of the key issues to consider for tax purposes: The type of visa and which country the worker is from can help determine whether it is normal payroll taxation or if certain exclusions from coverage apply, like under the Federal Insurance Contributions Act (FICA) for student visas, for example. Foreign Workers Employers bringing in
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ISSUE 12 GLOBAL PAYROLL MAGAZINE
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