Non-Resident and Resident Aliens

By definition, an "alien" is an individual who is not a U.S. citizen. Aliens are classified as non-resident aliens and resident aliens by the Bureau of Citizenship and Immigration Services.

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Resident Alien

Resident aliens generally are taxed on their worldwide income, similar to U.S. citizens.

To be classified as a resident alien, the individual must meet one of two tests:

  1. Green Card Test
    A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant. This status usually exists if the Bureau of Citizenship and Immigration Services has issued a green card.

  2. Substantial Presence Test
    A non-resident alien is classified as a resident alien for tax purposes if they were physically present in the U.S. for 31 days during the current year and 183 days during a three-year period that includes the current year and the two years immediately before that.

 

Non-Resident Alien

If a person does not meet either the Green Card or Substantial Presence Test, then that person is classified as a non-resident alien.

  • A new arrival on a J-1 or F-1 visa is generally a non-resident alien.

Non-resident aliens are taxed only on their income from sources within the U.S. and on certain income connected with the conduct of a trade or business in the U.S.

General Information Regarding the Taxation of Non-resident Aliens

Non-resident aliens are taxed on earnings received while living in the U.S. Non-resident aliens (Visa type F-1 and J-1) are exempt from FICA (Social Security tax). If the Visa type is F-1 or J-1, the non-resident alien may be exempt from federal taxes only if the country the alien previously lived in before arriving in the U.S. has negotiated an income tax treaty with the U.S. government.

If the country of residence has negotiated an income tax treaty and it covers the type of payment received while visiting the U.S., the non-resident alien should complete IRS Form 8233 for earned wages or IRS Form W-8BEN for scholarship/fellowship payments. These forms must be completed annually and delivered to the Corporate Payroll Office so that federal tax is not withheld from wages or payments. State taxes must be withheld on wage payments.

 

Payments to Non-Resident Aliens: IRS Form 1042-S

Duke will supply an IRS Form 1042-S to non-resident aliens who have received certain types of payments from Duke. These payments are usually in the form of financial aid, wages, and honorariums. For a definition of a non-resident alien, see Definition of a Non-resident Alien.

  • Payments that do not have to be reported include tuition, enrollment fees, books, and supplies.
  • Payments that are reported include stipends, housing, and transportation.

Please refer to Corporate Payroll Service's Issuing Payments to Foreign Nationals for more information.

 

IRS References: IRS Publication 519, IRS Form 1042-S, IRS Form W-2
Other References: Corporate Payroll Office, Duke Visa Services