Tax Treaty:
Generally, it is the Internal Revenue Service expectation that we withhold taxes on IU taxable income payments made to foreign persons.
Depending on the characteristics of the income, US tax law states the tax rate to be used.
In cases where there is a tax treaty between the US and your tax residence country, we may be able to extend a tax treaty benefit to you.
The benefit always results in a reduction of tax rate to be withheld; in many cases, the tax rate is reduced to 0.00% (or no taxes withheld on your taxable income).
For further information, please visit the following link:Tax Treaty.
Federal:
Form W-4 Rules (applicable only on wages/salary income)
When completing Form W-4 under the new
rules, you must:
- Not claim exemption from withholding on Line 7
- Use single status even if married
- Claim only one exemption (with a few exceptions). Additional
personal exemptions may be available for:
- Neighbors from Canada and Mexico,
- Nationals from the Northern Mariana Islands and American Samoa,
- Residents from Korea (South), and
- Students and business apprentices from India.
- Write "NRA" on the dotted line on Line 6
- At your option, you may request an additional withholding amount on
Line 6
The Internal Revenue Service has provided a new instructional notice for nonresident aliens completing the W-4 . Please access this link to read the following IRS notice: IRS Notice 1392. To access a current W-4, please go here: W-4.
State:
In general, the university is required to withhold state and local income taxes in the same way that is outlined in the discussion of federal income taxes above. If some or all of the income is exempt from federal taxes, the same income is exempt from Indiana state and local taxes.
All employees must file a form WH-4 with IU. Nonresident aliens must follow the same rules as for completing form W-4 above.
FICA:
For all employees not meeting an exception, FICA tax is withheld from employee wages at the rate of 7.65%, and IU pays a matching percentage on behalf of the individual.
A few countries have totalization agreements with the U.S. These agreements exempt their citizens or permanent residents from paying FICA tax.
Special exemptions from FICA withholding are usually available:
- Services performed by visitors temporarily in the U.S. on an F-1, J-1, M-1 or Q-1 visa, are exempt from FICA tax as long as (1) those services are consistent with the purpose for which the visitor has been granted visa status, and (2) the visitor is classified as a nonresident alien for tax purposes .
- Services performed by students who are employed by IU are exempt from FICA tax while that student is enrolled and regularly attending classes at IU during the spring and fall semesters. This exemption continues even when the student becomes a resident alien for tax purposes. Students in the visa statuses described in number (1) above may be authorized to work on campus in the summer even though they are not taking classes in the summer. For students who are resident aliens, FICA tax will be withheld during summer payroll periods when the student is not enrolled in classes. For students who are nonresident aliens for tax purposes, FICA tax will not be withheld from summer wages because of the exemption mentioned in number (1) above.
Foreign Source Income:
Employee wage and independent contractor payments that are made by IU to nonresident aliens for services that the nonresident alien performs outside the United States are not subject to federal income tax withholding. This exclusion applies only for services (1) performed in a foreign country (2) by an individual who is not a citizen or resident alien of the United States. The services are considered to be "sourced" in a foreign country and, therefore, are not subject to federal income or employment tax withholding.
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