Wages paid to U.S. citizens and residents by a U.S. person are generally subject to federal withholding, subject to certain exceptions. Wages paid to non-resident aliens are generally subject to reporting requirements and payments for services performed in the United States are generally subject to withholding, unless an exemption applies — for example, the common tax-treaty exemption for teachers, students, and researchers.
Tax withholding obligations may be impacted by tax residency, as well as income sourcing rules. And taxpayers seeking to apply a treaty exemption are generally required to file a Form 8233.
As a general rule, under the Internal Revenue Code, employers must withhold federal income tax as well as social security tax from the wages they pay to employees. In addition, employers generally must pay social security and unemployment taxes on behalf of their employees. These taxes are known collectively as ‘employment taxes.
More specifically, § 3402(a)(1) requires that “every employer” who makes a payment of “wages” must deduct and withhold tax at the source in accordance with detailed regulations and withholding tables (based upon graduated rates). The term “wages” is defined broadly in § 3401(a) as “all remuneration … for services performed by an employee for his employer,” subject to a number of specific exceptions.
Payments for services performed by a nonresident alien employee within the United States...
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