UNIVERSITY OF VIRGINIA FINANCIAL AND ADMINISTRATIVE POLICIES MANUAL TITLE: PAYROLL: FOREIGN NATIONAL INDIVIDUALS POLICY: XII.F.3x The Internal Revenue Service (IRS) separates Foreign Nationals into two taxation categories: RESIDENT ALIENS, and NONRESIDENT ALIENS. Tax regulations differ for each of these categories. Resident Aliens The IRS defines RESIDENT ALIENS as individuals who possess a "Green" card (Alien Registration Receipt Card, permanent resident card, or Form I-151 or I-551), or who have been present in the U.S. a minimum number of days based on the Substantial Presence Test. Resident aliens are taxed on their world-wide income. NOTE: The term "Resident Alien" as defined here, denotes a type of tax status, and is not necessarily consistent with the Immigration and Naturalization Service definition. Resident aliens are taxed in the same manner U.S. citizens are taxed. Individuals may claim Resident Alien status for tax purposes if: They possess a "Green" Card (Alien Registration Receipt Card, permanent resident card, or Form I-151 or I-551), or They pass the Substantial Presence Test. Resident Alien status will grant individuals tax treatment identical to that of U.S. citizens. Compensation is subject to federal and state taxes and FICA at U.S. citizen tax rates. Compensation and taxes will be reported on Form W-2. To claim this status at UVa, please follow these instructions: To claim Resident Alien status at UVa, because of documentation from the Immigration and Naturalization Service attesting to this status, please complete the Alien Information Request Form and attach a copy of this documentation. To claim Resident Alien status because one passes the Substantial Presence Test, complete the Alien Information Request Form (with the accompanying Substantial Presence Test on the back) and Form 1078, Certificate of Alien Claiming U.S. Residence. Attach a copy of the visa and Form I-94 (the arrival and departure record). Holders of J-1 visas should also attach a copy of the IAP-66. See also Procedure 12-60, "Completing Alien Information Request Form (Side 1) and Substantial Presence Test (Side 2)." See also Procedure 12-64, "Completing IRS Form 1078 For Foreign National Individuals." Please send completed forms to our Foreign National Tax Specialist at the following address: Foreign National Tax Specialist Carruthers Hall University of Virginia P.O. Box 9002 Charlottesville, Virginia 22906-9002. These forms will be reviewed and the proper tax treatment for your payments will be established depending on these forms. Resident Alien Payroll Instructions Resident aliens are taxed like U.S. citizens. Thus, resident aliens may complete their W-4 and VA-4 forms by following the instructions provided. They are entitled to the same number of personal exemptions as U.S. citizens, and the standard deduction. Resident aliens are taxed at graduated withholding rates, and they must pay FICA. (NOTE: Enrolled students are FICA exempt.) "GREEN" CARD HOLDERS (Alien Registration Receipt Card, permanent resident card, or Form I-151 or I-551) are treated identically to U.S. citizens. They may complete their W-4 and VA-4 following the instructions provided on these forms. OTHER VISA HOLDERS, who believe they are resident aliens because they have passed the Substantial Presence Test, should their W-4 and VA-4 forms following the instructions provided on these forms. To claim resident alien status, these individuals must come to either the Payroll department or Foreign National Tax office, in-person, with their passport and other identification (Form IAP-66 or I-20) to complete the Alien Information Request Form, the Substantial Presence Test, and Form 1078, Certificate of Alien Claiming Residence in the United States. See also Procedure 12-61, "Completing IRS Form W-4 For Foreign National Individuals."
Procedure 12-62, "Virginia Department of Taxation Form VA-4 for Foreign National Individuals." See also Procedure 12-64, "Completing IRS Form 1078 for Foreign National Individuals." Nonresident Aliens The IRS defines NONRESIDENT ALIENS as individuals who are temporarily in the U.S. who have a closer connection to another country than to the U.S. Nonresident aliens are taxed on their U.S. source income only. Nonresident aliens may be entitled to receive tax treaty benefits, if they are from one of the countries mentioned below. Residents or citizens of countries with whom the United States has treaties may apply for treaty benefits. Treaty benefits may reduce their liability or totally exempt them from paying taxes, depending on the treaty and provision. They may be entitled to claim treaty benefits, if they are from one of the following countries: Australia, Austria, Belgium, People's Republic of China, Commonwealth of Independent States (includes Armenia, Azerbaijan, Belarus, Krygyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan), Cyprus, Czech Republic, Egypt, France, Germany, Iceland, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Republic of Korea, Luxembourg, Mexico, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Romania, Russia, Slovak Republic, Spain, Sweden, Switzerland, Trinidad and Tobago, and Tunisia, and the United Kingdom. In order to claim treaty benefits, they must come in-person to Carruthers Hall to complete a number of forms. These forms may be completed at the Payroll counter anytime during regular business hours (8-5), or by appointment with the Foreign National Tax Specialist (924-1377). The international person must bring with them the following items: passport, I-94 card, and either their IAP-66 or I-20, or other official documentation for their visa. NOTE: NONRESIDENT ALIENS ON PAYROLL need to notify the I-9 Specialist in Human Resources (924-7831) when they begin their employment with UVa, and if either their visa status changes or they become resident aliens. NONRESIDENT ALIENS on the student information system, ISIS, need to notify International Student and Scholar Program (982-3010), if their visa status changes or they become resident aliens. Nonresident Alien Payroll Instructions Nonresident aliens will be taxed only on their U.S. source income at graduated withholding rates. All nonresident aliens must pay FICA, except for F-1 and J-1 visa holders during their exemption period. Unlike U.S. citizens and residents, nonresident aliens are not entitled to receive the standard deduction when they file their tax returns. To compensate for this, the W-4 instructions have been modified for nonresident aliens. Therefore, nonresident aliens MUST DISREGARD ALL INSTRUCTIONS PROVIDED ON THE W-4. Following those instructions will result in underwithholding, and a tax liability at the end of the year. Nonresident aliens may be entitled to receive tax treaty benefits, if they are from one of the countries mentioned above. If the nonresident alien's country is listed above, they should obtain a copy of Publication 901, U.S. Tax Treaties, or Publication 515, Withholding Tax on Nonresident Aliens and Foreign Corporations, from the IRS by calling 1-800-TAX-FORM, or from the IRS' web address: http://www.irs.ustreas.gov . Payroll must, nevertheless, obtain completed W-4 and VA-4 forms from nonresident aliens during the Employee Orientation or in the departments at the time of hire. (NOTE: Nonresident aliens MAY NOT claim "Exempt" on their W-4 or VA-4 forms.) These forms should be completed according to Procedure 12-61 and 12-62. The W-4 and VA-4 forms must be obtained whether or not the individual intends to claim treaty benefits, to ensure the proper level of taxes are withheld until the individual actively claims treaty benefits. To claim treaty benefits, the nonresident alien must come in-person to the Payroll department, with his/her passport and other official papers, to complete the Alien Information Request Form, Form 8233 and associated revenue procedures. Related Topics See also Policy IV.G.2, "Taxation Instructions for Foreign National Recipients of Scholarships/Fellowships." See also Policy VI.A.5x, "Payments To Individuals," related to payments to foreign national visitors' visa status. (Many restrictions apply to payments to foreign nationals, depending on the visa type.) ISSUED BY: 06/23/97 Assistant Comptroller for Accounting Operations 18.104.22.168