Foreign visitors to the University of Oklahoma Health Sciences Center may be subject to income tax on income or other benefits received while at the University. Payments which may be taxable include employee wages, fellowship and scholarship payments among others.
A general rule of U.S. tax law is that wages are taxed unless specifically exempted.
Income tax on employee wages is withheld at the graduated rates mandated by law. That means tax tables are used withholding different amounts of tax pending on the taxable amount of wages. This is also known as federal and state tax withholding.
Wages may also be subject to 7.65% FICA tax (also known as Social Security and Medicare tax). FICA is a different type of tax and is in addition to federal and state tax withheld from pay.
Tax treaties exist between the United States and about 70 other countries and some include exemption for certain foreign visitors for a specified length of time and/or certain dollar amount. Please keep in mind that even if a treaty exists between the U.S. and your country of Tax Residency, it does not necessarily mean you are exempt from tax withholding on U.S. wages. Applicable exemptions can be determined once you are in the U.S. and complete the Foreign National Information form.
Income tax treaties are bilateral agreements negotiated between the U.S. and governments of 66 countries. Some tax treaties allow for a partial or complete exemption from federal income tax for a given period of time. Each treaty has specific criteria including non-immigration status and other stipulations for treaty exemption.
Treaty exemption is based on tax residency, which may or may not be the same as citizenship. The mere existence of a tax treaty does not automatically translate to an employee payroll tax exemption. U.S. wages of a foreign national employee are typically covered in a treaty under a student or teacher/researcher article of the treaty.
Treaty exemptions with student or teacher/researcher articles cover exemption from federal tax withheld from pay.
When the completed Foreign National Information Form is received and the student or teacher/researcher has applied for and received a Social Security number, foreign national tax staff prepares the applicable treaty exemption form for signature. The exemption can be implemented when both the employee and OUHSC withholding agent have signed the form. Granting treaty exemption may be beyond the scope of the institution.
For questions regarding tax status email Payroll-Services@ouhsc.edu
General information regarding individual tax treaties IRS Publication 901 “U.S. Tax Treaties"
Detail information regarding Individual Tax Treaties
The U.S. tax system is organized according to the calendar year. Payroll taxes are withheld or exempt as determined by tax status and treaties.
The IRS, Internal Revenue Service, distinguishes between a Resident Alien, RA, and Nonresident Alien , NRA, tax status. These are tax terms only. They are irrelevant for immigration purposes. Information gathered in the Foreign National Information Form determines payroll tax status.
Payroll tax withholding
Federal and state payroll tax withholding on employee wages is based on a pay-as-you-go graduated tax system.
Federal and state payroll tax withholding is required unless there is an applicable income tax treaty exemption. Income tax treaty exemption is based on country of tax residency which may not be the same as citizenship.
FICA tax withholding
FICA tax, also known as Social Security and Medicare Tax, is based on tax status. FICA tax is different from federal and state withholding tax. FICA provides for a federal retirement system and is separate from income tax treaty exemption.
FICA tax withholding is generally required for the resident alien tax status with some exceptions for those in F-1 and J-1 student status.
Nonresident alien tax status is generally exempt from FICA tax for those of F-1 student or J-1 student or non-student nonresident alien status.
Foreign national payroll tax forms are located under Payroll Services Nonresident Alien Forms and Resident Alien Forms.
Tax status determines which individual income tax forms are required to be filed each year with federal and state government entities.
For detail information see Publication 519 “U.S. Tax Guide for Aliens”.
Contact our Foreign National Tax staff with questions regarding individual tax status at: Payroll-Services@ouhsc.edu
Note that tax status is different from immigration status. Email us with questions regarding tax status.
All RA employees complete form W-4. In addition, treaty exempt RAs sign form W-9. This form is prepared by Payroll Services as applicable. It is implemented when signed and dated by the employee.
RA employees receive form W-2 prepared by Payroll Services, summarizing taxable earnings and income taxes withheld for the tax year. Note that some J-1 non-student employees in Resident Alien tax status may also receive a form 1042-S in addition to form W-2.
Treaty exempt RA employees receive form 1042-S prepared by Payroll Services, summarizing the treaty exempt portion of wages for the tax year.
Form W-4 “Employee’s Withholding Allowance Certificate” for Resident Alien tax status. RA tax status complete the electronic W-4 form electronically via Self Service. If changing from an NRA (Nonresident) to RA tax status, email us for steps to get the NRA designation removed from the system to allow for the electronic W-4 to work.
Form W-9 “Request for Taxpayer Identification Number and Certification” – treaty exemption form for Resident Alien tax status requires treaty language added to the form.
Form W-2 “Wage and Tax Statement”. Form W-2 is an annual statement summarizing your taxable earnings from OUHSC. Payroll Services prepare W-2s. They are mailed out to addresses on record by January 31st of the following year.
Form 1042-S “Foreign Person’s U.S. Source Income Subject to Withholding." For employees, this form is used to record treaty exempt income for the tax (calendar) year. The form is mailed to recipients no later than March 15 of the following year. Payroll Services prepares 1042-S forms for employees. We strive to mail the 1042-S by mid February to the recipient.
Note that tax status is different from immigration status.
NRA employees complete Form W-4 and W-8BEN. In addition, treaty exempt NRAs sign form 8233 prepared by foreign national tax staff.
Treaty exempt NRAs receive form 1042-S prepared by foreign national tax staff, summarizing the treaty exempt portion of wages for the tax year. For any portion of wages that are not exempt by treaty, a W-2 form will be prepared in addition to form 1042-S.
Form W-4 "Employee’s Withholding Certificate” has separate instructions for employees in NRA tax status. Form W-4 determines the amount of federal and state income taxes withheld from your pay. This form is prepared by foreign national tax staff for NRA employees and need to be signed by the employee, you will not have access to alter your Tax Withholding in Employee Self Service. Following are the general rules for the W-4 form for employees in NRA status:
- In general, NRA status employees have just one option, which is “single” regardless of marital status with “Nonresident Alien” or “NRA” on line 6 of the form.
- The “Single” corresponds to a payroll tax withholding table issued by the Internal Revenue Service, IRS. IRS regulations requires an additional amount per pay period be added to wages of an NRA solely for calculating the federal tax withholding each payroll period. OUHSC is required to add this amount to calculate the federal tax withheld from each bi-weekly payroll.
- Exception to the rule is students from India in F-1 or J-1 student status who are excluded from having the additional amount added to the payroll federal tax calculations.
- Until the proper NRA form W-4 is received, we are required to use the tax withholding rate of “single”.
- Complete the Foreign National Information Form to determine tax status.
Form W-8BEN “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding” used for NRA employees to indicate NRA status. This form is prepared by foreign national tax staff for NRA employees and need to be signed by the employee.
Form 8233 “Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.” This form is prepared by foreign national tax staff for NRAs qualifying for income tax treaty exemption for all or part of wages for the year as dictated by the relevant treaty. It will be implemented when signed by the employee and the OUHSC withholding agent.
Form 1042-S “Foreign Person’s U.S. Source Income Subject to Withholding." For employees, this form is used to record treaty exempt income for the tax (calendar) year. The form is mailed to recipients no later than March 15 of the following year. Payroll Services prepares 1042-S forms for employees. We strive to mail the forms by January 31 in conjunction with the Form W-2 the employee may receive in addition to the 1042-S form.
Foreign national employee individual income tax form information
Note - while OUHSC does not offer assistance in the preparation of individual income tax returns, a tax software is made available each year for Nonresident Alien employees for use in preparing individual income tax returns. Email us for more information.
For IRS general concepts regarding Foreign national taxation
For IRS information for the tax status regarding Nonresident Aliens
For IRS information regarding tax status of Resident Aliens
For IRS information regarding tax status of Dual-Status Aliens
What payroll taxes are deducted from my paycheck and what happens to the amounts withheld?
Federal withholding tax, shown on your earnings statement as "Fed Withholding", is based on tax withholding tables issued by the IRS, Internal Revenue Service. The amounts withheld are reported by OUHSC on an annual form W-2 form for your use when preparing your individual income tax returns (forms).
State withholding tax, shown on the earnings statement as "OK Withholding" is based on tax withholding tables issued by Oklahoma Tax Commission and are also reported on the form W-2.
FICA tax (also called Social Security and Medicare Tax) shown in your earnings statement as "Fed OASDI/EE" and "Fed MED/EE" respectively. The combined rate deducted from employee's pay is 7.65 percent. Among other things, FICA, Federal Insurance Contributions Act, provides for a federal system of old-age insurance.
Are foreign nationals exempt from taxes?
For all or a portion of wages to be exempt from federal tax withholding, the relevant sections of the income tax treaty must be met.
For FICA tax to be exempt under the foreign national rules, you must be a nonresident alien in F-1 or J-1 status. To be exempt under the Student FICA rule, you need to carry sufficient credit hours per semester and maintain F-1 or J-1 student status. This is the general rule. For foreign nationals with prior stays in the U.S. the rules may change. Email us with questions on your individual status.
Can I decide on the amount of taxes withheld from my pay?
The form W-4 is the tax form used by employees to direct the amount of federal and state taxes withheld from your pay. However, for foreign nationals in nonresident alien tax status there are additional instructions by the IRS on how to complete this form. Foreign nationals in resident alien tax status complete the form following the instructions on the form. The amount of federal and state income tax withheld from your pay depends on your tax status and any applicable income tax treaty .
What are individual income tax returns?
Foreign nationals must prepare individual income tax forms, called "returns", with the U.S. federal and state governments. For Nonresident Aliens (NRA), OUHSC makes available a NRA tax preparation software. NRAs use the federal form 1040NR series tax forms and the form 511NR for the state of Oklahoma. Resident Aliens (RA) file tax forms similar to U.S. citizens using the form 1040 series. RAs can use the services of a tax preparation professional or tax preparation software. Each individual is responsible for filing tax returns.
How do I file tax returns if I am in both nonresident alien and resident alien status in the same tax year?
We recommend you seek the advice of a tax accountant.
How do I get my final pay and/or income tax refund if I leave the country?
Prior to leaving the U.S., discuss with your U.S. bank how to keep your account open so your final pay can be deposited, and how to set up a wire transfer for the funds to be transferred to your foreign bank account. If you have a refund of tax on your U.S. federal or state tax return (or both), you may direct the IRS to deposit the amount into your U.S. bank account. Note that the IRS will not deposit refunds into foreign bank accounts. If you close your U.S. bank account after returning home, and before you receive any tax refund due, you may not be able to cash a check.
What happens if I fail to file my taxes?
The IRS (Internal Revenue Service) can assess penalty and interest and seize U.S. bank assets for repayment. Fines and penalties can amount to more than the original debt. There can be immigration consequences for failing to file taxes. Applicants for a permanent residency "green card" must provide proof of filing taxes for all years of residence in the U.S.
What happens if I file my taxes but use the wrong forms?
We recommend you consult with a tax professional and with your immigration attorney.