Who is a nonresident alien? (Green Card Test)

A nonresident alien is an individual who is not a U. S. citizen and does not hold an Alien Registration Card (commonly called a green card) and who has not met the substantial presence test.

The Immigration and Naturalization Service (INS) issues green cards to aliens who have petitioned for residence status. When an alien receives a green card, he/she has obtained the privilege of residing permanently in the U.S. and is now considered a resident alien. A resident alien has all the privileges of a U.S. citizen with two exceptions: 1) A resident alien does not have the privilege to vote. 2) A resident alien is not permitted to serve on jury. For tax purposes a resident alien is viewed the same as a
U.S. citizen.

An alien meets the substantial presence test after being present in the U.S. for 183 days over a three-year period. The three-year period must include the current year and the two years immediately preceding. Any period during which an alien is in exempt status does not count toward the accumulation of 183 days. Exempt status most commonly seen in a university environment would be students or teachers present in the U.S. on an \"F\", \"J\", \"M\", or \"Q\" visa.

What is a visa?

A visa is a stamp on a page in the passport of an alien. The visa allows the passport bearer permission to apply for entry into the U.S. under the conditions specified by the visa type, which the bearer holds.

A visa can be obtained by making a personal appearance before the consular officer assigned to the applicant's consular district. The applicant must complete Form OF-156 (Application for Non-Immigrant
Visa). A consular officer may ask for additional information to verify that the applicant is eligible for the non-immigrant visa for which he/she is
applying.

Examples of information contained on the visa stamp are as follows:

• Visa Number
• Visa Type
• Issue Date
• Expiration Date
• Location of the Issuing Office

What is the difference between an immigrant and non-immigrant?

An alien who enters the U.S. for a temporary stay, that ends when they have accomplished the purpose of their visit, is considered a non-immigrant. An alien who has been lawfully admitted to the U.S. for permanent residence is an immigrant. The term immigrant is interchangeable with the term permanent resident.

What is a tax treaty?

The Treasury and State Department negotiate tax treaties between the United States and foreign countries. Both the President and the Senate must approve a treaty. One main purpose of a treaty is to prevent international double taxation. International double taxation occurs when more than one country taxes the same income. Income tax treaties prevent double taxation by allowing a particular type of income to be taxed by either of the countries involved in the treaty.

Not all countries have a tax treaty with the United States. If a nonresident alien, who is a non employee visitor from a country without a tax treaty, is eligible to receive a payment from the university, the payment is subject to withholding at a rate of 30%. A nonresident alien who is an employee from a country without a tax treaty is subject to the employee graduated tax withholding tables. The tax withholding is calculated based on an employee's Form W-4 and Form NC-4. See Special Instructions For Nonresident Aliens (Form W-4 and Form NC-4) in the Forms section of
this guide.

Each treaty the United States negotiates with a country is unique unto itself. Therefore, a general statement cannot be made that a specific type of income is exempt for all nonresident aliens on campus. If a nonresident alien is eligible to receive income from the university, his/her country of residence must first be determined. Then a review of the tax treaty for that country can be made to determine if the type of income in question is exempt. If the income is exempt from withholding due to a tax treaty, the nonresident alien must complete a Form 8233 to apply for the exemption
from withholding.

What is a Form 8233?

A nonresident alien completes Form 8233 to apply for a treaty exemption from tax withholding on any income earned in the U.S. Once the University completes the agency part of this form, the Payroll Officer must forward it to the Internal Revenue Service, International Returns Section, P.O. Box 920, Bensalem, PA 19020-8518. The exemption does not become effective until ten days after the Form 8233 is mailed to the IRS.

The University cannot issue a check to the alien until the 10 day waiting period has expired. To issue the check before the expiration of the waiting period, the mandatory 30% will be withheld and sent to the IRS. To recover the withheld taxes, the alien must file a U.S. income tax return.

What is a Form I-94?

With few exceptions, all aliens entering the country receive an I-94. The I-94 is an Arrival/Departure Record. The INS keeps the arrival portion. The departure portion is stapled to the passport. The I-94 shows the visa classification, the date of entry, and the length of the stay authorized.

What if an alien is from a country without a tax treaty?

If the alien is from a country without a tax treaty, and the alien is not an employee of the university, the IRS requires the University to withhold the mandatory 30% on any eligible payments. However, if the alien is an employee, tax is withheld using the graduated withholding rates and calculated based on their Form W-4. The University remits the withheld tax to the IRS. The alien must complete a U.S. Tax Return to try to recover these amounts.

Who needs an identification number?

Any NRA receiving a payment from the University is required to have an identification number. It does not matter if the NRA is receiving a reimbursement for travel expenses or some type of honorarium. Those who complete a Form 8233 and apply for a tax treaty exemption are required to have an identification number. The Form 8233 asks for the identification number in Part 1 of the form.

If the NRA is eligible to work in the United States, the law requires that the NRA have a social security number for identification. Application for a social security number is done on Form SS-5, which is filed with the Social Security Office.

If the NRA is not eligible to work in the United States, the IRS requires the NRA to apply for an ITIN. To receive an ITIN the alien applies with the IRS. A Form W-7 is completed to apply for the ITIN.

What is a TN (Trade NAFTA) Visa?

The TN (Trade NAFTA) classification is available to a Canadian or Mexican citizen who seeks to enter the U.S. on a temporary basis to work in a professional-level job under provisions of the North American Free Trade Agreement. The individual must be employed in one of the professions listed in the federal regulation at 8 CFR 214.6 and have at least a baccalaureate degree unless an alternative credential is specified. The list includes university professors and researchers in addition to many other professions.

What is the Substantial Presence Test?

A calculation of the number of days an individual is physically present in the U.S. over a period of three calendar years, taking into consideration (i) all of the days physically present in the U.S. during the current calendar year, (ii) one-third of all of the days physically present in the U.S. during the first preceding calendar year, and (iii) one-sixth of all the days physically present in the U.S. during the second preceding calendar year. The results of the calculation determine whether the individual will be treated as a resident alien or a nonresident alien for tax purposes. If the result of the substantial presence test equals 183 days or more, the individual will be treated as a resident alien for tax purposes; if the result of the substantial presence test is less than 183 days, the individual will
be treated as a nonresident alien for tax purposes.

Note: If you have questions for which you feel the answer would be beneficial for others, please send them to Jacqueline Strickland, Payroll Officer. They may be used when this guide is updated in the future.

Jacqueline Strickland, Payroll Officer
Telephone: 910.521.6284
Fax: 910.775.4199
Address: P.O Box 1510, Pembroke, NC 28372
Email: jacqueline.strickland@uncp.edu