Guide to Taxation of Foreign Employees

Nonresident Alien (NRA):
• Generally: The worker must obtain a Social Security Number, even if not subject to Social
Security & Medicare taxes. This is necessary for reporting wages.
• Non-Resident Aliens are only allowed to claim Single status with 1 dependent exemption. Residents of Canada & Mexico who commute to work are not restricted to the S-1 status.

TYPE OF VISA	FICA	FIT	SIT	SUTA	FUTA
B-1	N/A*	N/A*	N/A*	N/A*	N/A*
B-2	N/A*	N/A*	N/A*	N/A*	N/A*
D-1	Exempt	Exempt	Exempt	Exempt	Exempt
E-1	Taxable	Taxable	Taxable	Taxable	Taxable
E-2	Taxable	Taxable	Taxable	Taxable	Taxable
F-1, J-1, M-1	Exempt	Taxable	Taxable	Taxable*	Exempt
H-1 A&B	Taxable	Taxable	Taxable	Taxable	Taxable
H-2 A&B	Taxable	Taxable	Taxable	Taxable	Taxable
L-1	Taxable	Taxable	Taxable	Taxable	Taxable
O-1, O-2	Taxable	Taxable	Taxable	Taxable	Taxable
P-1	Taxable	Taxable	Taxable	Taxable	Taxable
Q-1	Exempt	Taxable	Taxable	Taxable*	Exempt
R-1	Exempt	Taxable	Taxable	Taxable*	Exempt
J-2, F-2, M-2, Q-2	Taxable	Taxable	Taxable	Taxable	Taxable

Notes:

N/A* = Not allowed to work in the U.S.

Taxable* = Depends on State; verify with individual state agencies

Exempt = For employees with Visa’s that exempt them from FICA & FUTA, most states tax these employees for SUI. The following states exempt them: Arkansas, Colorado, Florida, Maryland, Pennsylvania, Washington, and Wisconsin.

Some countries have tax treaties with the US which may exempt withholding ( Form 8233
must be filed before work begins).
- http://www.irs.gov/businesses/small/international/article/0,,id=96454,00.html
A Green Card (Form I-551) is a permanent resident visa form. An employee with a Green
Card is taxed exactly like a regular US citizen.

Visa Type Descriptions:

B-1 (business)
B-2 (tourist)
D-1 (Foreign transport company, US transport company)
E-1 (Treaty Trader)
E-2 (Investor)
F-1, J-1, M-1 (Student up to 5 years, Teacher/trainee up to 2 years)
H-1 A&B (Specialty Occupations)
H-2 A&B (Temp. Seasonal Workers)
L-1 (Intracompany transfers)
O-1 (Extraordinary ability)
O-2 (Assistant to above)
P-1 (Entertainers & athletes)
Q-1 (Cultural exchange visitors, Student up to 5 years, Teacher/trainee up to 2 years)
R-1 (religious occupations; may only be employed by the religious org that sponsored them)
TN (NAFTA Professionals)
J-2, F-2, M-2, Q-2 (Spouses of “1”)

Guide to Taxation of Foreign Employees

Certain payments of U.S. source income made to foreign persons are subject to tax withholding. The following is a table of basic taxation rules for different Visa types which could be issued to foreign individuals that are being employed in the U.S.