Payroll and Employee Benefits
FICA/Medicare TaxGenerally, an individual can be exempt from FICA/Medicare taxes under two sections of the Internal Revenue Code:
- 3121 (b)(19)- To qualify under this exemption an individual must be:
- A non-resident alien for tax purposes based on the substantial presence test and
- Present in the US in F, J, M or Q status and
- Performing services in accordance with the primary purpose of the visa to include working legally and the individual must be the primary holder of the visa. Thus an individual in a dependent status does not qualify under this section of the code OR
- 3121 (b) (10)- To qualify under this exemption an individual must be:
- In any federal tax status to include non-resident aliens, resident aliens, permanent residents or US Citizens and
- A student who works for the school at which he/she is enrolled and is attending classes
Federal TaxForm W-4 is the tax form completed by the employee to determine federal tax withholding from your paycheck. A W-4, in the case of a Non-Resident Alien MUST be completed as the IRS requires:
- Single Marital Status - Regardless of your actual marital status (line 3)
- One Withholding Allowance (line 5)
- Write NRA on the dotted line (line 6). This is an additional amount as determined by the IRS guidelines for withholding on Non-Resident Aliens. Current year federal withholding guidelines for Non-Resident Aliens can be found in IRS Publication 15 (Circular E).
Sample of NRA W-4There are exceptions to this requirement, however they are very limited and will be determined by the Tax Compliance on an individual basis.
Tax TreatiesIncome Tax Treaties are bilateral agreements between two countries established to avoid the "double taxation" of income. A summary of Tax Treaties can be found in IRS publication 901. Tax treaties contain very specific language and requirements as to who may qualify for the exemption. Each income tax treaty varies in reference to the type of income earned and amount of the exemption available. Tax Compliance, based on information obtained from the AU Alien Employment and Tax Form, will determine if the employee qualifies for an exemption from federal tax based on the tax treaty. General requirements to claim treaty benefits:
- You must have a US issued Social Security Number.
- You must sign form 8233 each year that you qualify for the exemption. The Tax Compliance Office will send these to you on an annual basis.
- Once the Tax Compliance Office has received the signed and dated form, the 8233 is sent to the Internal Revenue Service. The IRS is given 10 business days to review the form for validity.
- Your treaty benefit will begin on the next available payroll.
State of Alabama TaxEach state is governed by their own tax laws. A non-resident in the state of Alabama has a different meaning than a non-resident alien for federal tax purposes. The state of Alabama does NOT honor federal tax treaties. Individuals are only exempt from Alabama State tax if they make less than $1800.00/year.
City of Auburn TaxIndividuals working in the city limits of Auburn, AL will have a 1% tax withheld from their salary.