On October 31, 2005 the IRS issued new rules for 2006 for withholding on wages of nonresident employees. Whether you are a nonresident employee depends upon the results of the 183-day residency formula using your immigration status/history and U.S. days of presence. If you are currently being taxed as a resident alien for tax purposes you may disregard this notice.

The goal of the new rules is to provide withholding on wages that more closely approximates your income tax liability. The new rules accomplish this with new Form W-4 rules and special payroll computations for withholding on wages. The new payroll calculation should be implemented by the end of June 2006.

New Form W-4 Rules
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

What do you need to do now?
Indiana University has pre-completed a Form W-4 for nonresidents to use that follows the rules of the new W-4 and is available at http://www.fms.indiana.edu/tax/forms/nra_fw4.pdf. You can enter your Name, Social Security Number, and Address on this fill-able form and then print for signature and submission. This pre-completed form assumes that you do not qualify under one of the exceptions identified in number 3 above. If you do meet one of the exceptions and are interested in claiming additional personal exemptions please cross out the 1 entered on line 5 and enter the number you want to claim. Completed W-4 forms should be returned to your departmental payroll office.

Will my withholding be lower based on the new Form W-4?
Yes, because you do not have to include an additional withholding amount from each paycheck.

What if I do not submit a new Form W-4?
If you have previously submitted a Form W-4 to Payroll, which may include an additional withholding amount, your prior Form W-4 will remain effective. You should submit a new Form W-4 at least by the effective date of the new payroll calculations. The new payroll calculation should be implemented by the end of June 2006.

Please contact Financial Management Services Tax Department with questions concerning this new W-4