Note: This is a printed version of https://isc.uw.edu/your-pay-taxes/foreign-nationals. Please visit this page on the ISC website to ensure you're referencing the most current information.
Tax Withholding (Foreign Nationals)
As detailed on this page, the ISC provides treaty and payroll tax resources to Foreign Nationals and the staff who support them. For all other matters related to Foreign Nationals, refer to UW Global Operations Support for compliance/legal matters, HR Procedures, and purchasing/payments.
On This Page:
- Know The Basics
- Tax Treaty Eligibility
- FICA (Social Security and Medicare) Taxes
- Ensuring Correct Taxation if Working Outside the US
Know The Basics
A Foreign National is a person who is not a citizen of the United States or a permanent resident (green card holder).
For immigration purposes, a Foreign National is a person who is not a citizen or permanent resident of the US who has been admitted on a visa for a temporary stay. Immigration status as a Foreign National does not change unless you become a US permanent resident or US citizen, regardless of tax status.
The UW uses Glacier Tax Compliance to determine the tax status of all Foreign Nationals receiving payments through Workday. This includes both compensation and wages and/or stipend payments (scholarship/fellowship). The tax determination is important since it will determine how federal withholding tax and FICA tax (Social Security and Medicare) are deducted from payments. Tax deductions are based on IRS rules regarding federal and FICA taxes.
Foreign Nationals may or may not be issued certain payments based on their visa type. The UW Global Support website provides detailed information regarding the types of payments that Foreign Nationals can receive based on visa type. This information is important since providing payments to Foreign Nationals can affect their immigration status.
Tax Treaty Eligibility
A tax treaty (PDF) is an agreement negotiated between the United States and certain foreign countries to avoid or reduce double taxation on residents of the other country.
The UW applies tax treaty exemptions as a courtesy and is not required to grant treaty exemptions.
A Foreign National must have a US social security number or ITIN to be considered for a tax treaty benefit. Refer to the Obtaining an SSN or ITIN page.
Determining Your Tax Treaty Eligibility
Foreign Nationals should use Glacier Tax Compliance to determine if they are eligible for a tax treaty exemption. It will also generate IRS Forms 8233 and/or Form W-9 and any related attachments.
Foreign Nationals can also refer to IRS Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities (PDF) to make an initial assessment of their tax treaty eligibility.
⇒ If Glacier Tax Compliance determines that you ARE eligible for a wage tax treaty exemption:
The tax treaty benefit will be applied to your pay after the tax treaty forms are received in the ISC Payroll Office with your Glacier paperwork. The UW will not refund Federal Withholding Tax withheld prior to receiving the tax treaty forms. Federal Withholding Tax will not be withheld from future paychecks until the tax treaty exemption dollar limit or the exemption time limit is reached.
The tax treaty exemption Form 8233 is valid only for the current tax year; this form must be renewed each year. A renewal notification will be sent from Glacier Tax Compliance if you are eligible.
⇒ If Glacier Tax Compliance determines that you ARE NOT eligible for a wage tax treaty exemption, or are not claiming a wage tax treaty:
Even if the tax treaty exemption is not provided by Glacier Tax Compliance, a Foreign National may still claim the tax treaty when filing their year-end tax return with the IRS.
Scholarship and Fellowship payments issued to nonresident aliens for tax purposes are subject to 14% Federal Withholding Tax if there is no tax treaty exemption IRS Form W-8BEN on file.
Glacier Tax Compliance will determine if you are eligible for a tax treaty exemption and create IRS Form W-8BEN; this form is valid for three calendar years and must be renewed through Glacier Tax Compliance.
A list of current Scholarship and Fellowship tax treaties is available in IRS Publication 901 (PDF).
FICA (Social Security and Medicare) Taxes
In general, United States FICA taxes apply to payments of wages for services performed as an employee in the US, regardless of the citizenship or residence of either the employee or the employer.
The FICA tax exemption will be determined by Glacier Tax Compliance.
Determination of an exemption from FICA is based on the calendar year* (January-December) a Foreign National enters the United States:
- Students on F-1 or J-1 visas are exempt from FICA taxes for the first five calendar years based on the date that they entered the US with an F-1 visa (not just for the UW).
- Scholars (non-students) on J-1 visas are exempt from FICA taxes for the first two calendar years from the date they entered the US using a J-1 non-student visa (not just for the UW).
- Students and scholars on J-2, H-1, H-4, E-3, and TN visas are required to pay FICA taxes.
*The calendar year may only be a partial year. For example, if a Foreign National entered the United States on December 31, 2016, 2016 counts as their first calendar year.
Ensuring Correct Taxation If Working Outside the US
Guidance for US citizens working abroad can be found on the Tax Withholding Information For US Citizens page.
Payments made to a Foreign National who performs services outside of the United States are not subject to Federal Withholding Tax, or FICA (Social Security and Medicare) taxes. As a result, the following procedure must be followed to help ensure that a Foreign National employee is taxed correctly.
Before initiating the hire and/or contacting ISC Payroll:
1. Review UWHR’s policy regarding international remote work for staff and student employees.
2. Secure required approvals in advance: ensure the appointing authority is aware the employee is working remote internationally and that a telework agreement is in place with the department.
If the employee will be paid from a grant, you will also need to ensure there are no compliance issues with the employee working internationally.
3. Notify and coordinate the hire with UW Tax Office – contact firstname.lastname@example.org
Simply notifying the Tax Office does not mean the unit has approval to hire or transfer, nor does it eliminate the unit’s obligation to seek counsel and ensure compliance with all state- or country-specific laws.
4. Email the ISC at email@example.com and attach the UW Tax Office’s approval of the employee’s remote work overseas.
5. Send a completed Certificate of Foreign Status and supporting documentation to the ISC – visit the Certificate of Foreign Status page for guidance.
6. Confirm/update the employee’s Work Location in Workday. If the employee’s Work Location in Workday is set to a local address, the employee’s pay will be subject to Washington state taxes. Make sure the employee’s Work Location is set to their out-of-country work location.
To verify the employee’s work location, navigate to their Worker Profile page in Workday and, under Job Details, review Location. If the Work Location needs to be updated, follow the guidance found in the Change Job – Data Change – Voluntary Location or Work Shift Change User Guide.
When updating the Work Location in Workday, if the country in which the employee resides/works is not listed, please contact the ISC for guidance.
7. The employee should Verify that their Home (Primary) Address in Workday accurately reflects their overseas location, and that they’ve designated a Mailing address. Visit the Managing Your Personal and Work Information in Workday page for guidance.
Foreign National employees who live and work outside of the United States, and who have successfully completed the above procedure, will not receive any United States tax forms related to the work performed while outside the United States.
Once the employee returns to the US:
1. The employee’s department must update the employee’s Work Location in Workday to their US location – this is critical to ensure proper taxation and will impact UW Benefits.
2. The employee is required to complete the Form I-9. Federal law requires employees to complete their Form I-9 within three business days of their first day working locally to verify they are authorized to work in the United States.
3. The department or the employee should contact the ISC with the date the employee has returned to the US. ISC Payroll will then create a Glacier Tax Compliance account for the employee.
4. Once the employee’s Glacier Tax Compliance account has been established, they must enter their information in the system.