Nonresident Aliens

Starting January 1, 2010 employers will need to perform an additional step when calculating Federal income tax withholding for nonresident aliens. Previously employers were only required to add "phantom" wages to nonresident aliens gross wages before looking up the withholding on the tax tables based on their allowances (S,1). The new process can be found in (Circular E) Publication 15, The Employer's Tax Guide (page 16).

The IRS has also issued new table for Withholding Adjustment for Nonresident Aliens. The new table can be found in (Circular E) Publication 15, The Employer's Tax Guide (page 70).

The income tax withholding tables reflect two tax benefits for which nonresident alien employees are not eligible: (1) the standard deduction; and (2) the Making Work Pay Tax Credit. If adjustments from the generally applicable procedures for using the income tax withholding tables are not made in determining income tax withholding for nonresident aliens employees, the withholding on the wages of such employees will generally be less than their tax liability.

Please note that if we process your payroll, you don't need to do anything other than notify us that the individual is a nonresident alien.