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Section 16 – Taxes

Section 16.1 – Foreign Nationals

Date: 11/2/06 — Approved: Finance Board

Note: This policy is intended for the purpose of informing AS employees and other AS-related individuals about relevant tax issues. This policy does not constitute legal or tax advice. Individuals should consult with their attorneys or tax professionals for advice on personal issues.

OVERVIEW

U. S. Citizenship and Immigration Services (USCIS) within the Department of Homeland Security and Internal Revenue Service (IRS) regulations govern AS payments to foreign nationals including but not limited to foreign national employees, independent contractors, and students. The purpose of this document is to provide guidance to division personnel regarding the special documentation and processing requirements governing employment and other payments to foreign nationals. The special documentation and processing requirements governing employment and other payments to foreign nationals are in addition to the standard AS document and processing requirements governing employment and payments to United States citizens.

DEFINITIONS

Foreign nationals

Foreign nationals, also referred to as aliens, are persons who are non-United States citizens. The IRS distinguishes between two types of aliens for federal income tax purposes: resident and nonresident aliens. The taxability of payments to nonresident aliens (and some resident aliens) is subject to special rules.

Resident Alien

A resident alien is a non-United States citizen who satisfies either the "green card test" (see "Green Card Test" in this section) or the "substantial presence test" (see "Substantial Presence Test" in this section) during the calendar year as described in IRS Publication 519, U.S. Tax Guide for Aliens. The tax status of an individual who is a resident alien by substantial presence may change from year to year. Therefore, the AS payroll department must confirm the United States tax status of all resident aliens on the AS payroll at the beginning of each calendar year or prior to the individual's first payment during the current calendar year.

Green Card Test

Generally, foreign nationals that have been issued an alien registration receipt card, also known as a "green card," by the USCIS are permanent residents and should be considered resident aliens for federal income tax purposes. Foreign nationals continue to have permanent resident status unless it is taken away from them or it is administratively or judicially determined to have been abandoned.

Substantial Presence Test

A foreign national is a resident alien if the individual is physically present in the United States for at least 31 days in the current calendar year and present 183 days or more based on counting: all days present during the current year, plus 1/3 of the days present in the preceding year, plus 1/6 of the days present in the second preceding year. Certain days of presence are disregarded such as: (1) days spent in the United States for a medical condition that developed while the foreign national was present in the United States and unable to leave, (2) days regular commuters spend traveling to or from Canada or Mexico, (3) a day of less than 24 hours spent while in transit between two locations outside the United States, and (4) days when the foreign national was an exempt individual. The individual is considered a resident alien for federal income and employment tax purposes from the first day of physical presence in the United States in the year that the test is satisfied.

Exemptions

Special exemptions to the substantial presence test may apply to certain foreign nationals. Two such classes of foreign nationals are: (1) students on F, J, M, or Q visas, and (2) teachers and trainees on J or Q visas. Students do not count their days of physical presence for five calendar years. A student may be exempt from counting days of United States physical presence beyond five calendar years if he or she proves to the IRS that he or she does not intend to reside permanently in the United States. A determination that the exemption may be extended beyond five years must be obtained from the District Director of the IRS for the extension to apply. Teachers, trainees, or any other J or Q non-students do not count days of United States physical presence in a calendar year provided that the individual has not been in the United States as a F, J, M, or Q student or a J or Q non-student for any two of the six prior calendar years. Partial calendar years are considered full calendar years for these limitation purposes.

Nonresident Alien

A nonresident alien is a non-United States citizen who does not satisfy either the "green card test" (see "Green Card Test" in this section), or the "substantial presence test" (see "Substantial Presence Test" in this section) during the calendar year. A nonresident alien's United States tax status may change from year to year. Therefore, the AS payroll department must confirm the United States tax status of all nonresident aliens prior to the individual's first payment during the calendar year.

TAXPAYER IDENTIFICATION NUMBERS

Foreign nationals performing services for and receiving payments from the AS must obtain and furnish the AS with either (1) a Social Security Number (SSN) issued by the Social Security Administration (SSA), or (2) an Individual Taxpayer Identification Number (ITIN) issued by the IRS.

Social Security Number

Every foreign national must either have an SSN or be in the process of obtaining an SSN for AS employment. If an individual does not already have an SSN, he or she must file Form SS-5, Application for a Social Security Card (see Form SS-5 under "Foreign National Forms and Publications" at the end of this section), along with (1) proof of identity (for example, a valid passport or birth certificate), and (2) work authorization or proof of eligibility to be in the United States (for example, Form I-94, Arrival-Departure Record and Form DS-2019 (formerly known as Form IAP-66), Certificate of Eligibility for Exchange Visitor (J-1) Status) with the local SSA Office. Call 1-800-SSA-1213 to determine the nearest location.

An individual's visa status may permit certain types of employment, and holders of such visas are required to obtain an SSN, (for example, F-1, J-1, J-2, and H-1B). Generally, individuals who are not eligible to obtain an SSN may not be employed by the AS A copy of the card or proof of application for an SSN should be retained in the individual's file, and a copy should be sent to the AS payroll department.

Immigration Compliance

Associated Students will comply with applicable immigration law, including the Immigration Reform and Control Act of 1986 and the Immigration Act of 1990. As a condition of employment, every individual must provide satisfactory evidence of his or her identity and legal authority to work in the United States. The most common forms of identification are a driver’s license and social security card; however, other documents may be used.

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