Foreign Taxes

Taxes for Foreign National Employees

Residents for Tax without a Tax Treaty:

  • Treated just like a US citizen is, tax wise.
  • Federal taxes are assessed according to the Income Tax Withholding Table.
  • Illinois state taxes are 4.95% of Illinois taxable income.
  • Social Security Tax = 6.2%
  • Medicare Tax = 1.45%

Residents for Tax with a Tax Treaty

  • Federal taxes – depending on time/dollar limits of treaty, may not pay any taxes. If limited by dollar (student), any dollars earned after the limit is reached are taxable according to the Income Tax Withholding Table. If limited by time, once the time limit is expired, dollars earned will be taxed according to the Income Tax Withholding Table. Tax treaty benefits for residents for tax are taken on forms W9 and W9A. Click here for country list
  • State taxes – depending on time/dollar limits of treaty, individuals may not pay any taxes. If limited by dollar (student), any dollars earned after the limit is reached are taxable according to the Illinois rules (4.95%). If limited by time, once the time limit is expired, dollars earned will be taxed according to the Illinois rules (4.95%)
  • Social Security Tax = 6.2% (tax treaty does NOT apply to Social Security tax)
  • Medicare Tax = 1.45% (tax treaty does NOT apply to Medicare tax)

Nonresidents for Tax without a Tax Treaty

  • Federal taxes – For nonresidents an additional amount of $396.20 for biweekly employees and $858.30 for monthly employees is added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. These amounts are not included in any box on the employee’s W2 form. 

    Example: If John earns $1000 a month as a teaching assistant, the University determines the wages to be used in the withholding tables by adding $858.30 to the $1000 wages.  
     
  • Illinois state taxes are 4.95% of taxable wages.
  • Social Security Tax – Is exempt from this tax under IRS code: 3121(b)(19). Certain visa statuses are NOT exempt from this tax regardless of residency status (H-1B, J-2, O-1, TN).
  • Medicare Tax – Is exempt from this tax under IRS code: 3121(b)(19). Certain visa statuses are NOT exempt from this tax regardless of residency status (H-1B, J-2, O-1, and TN).

Nonresidents for Tax with a Tax Treaty

  • Federal taxes – depending on time/dollar limits of treaty, may not pay any taxes. If limited by dollar (student), any dollars earned after the limit is reached are taxable according to the Income Tax Withholding Table. If limited by time, once the time limit is expired, dollars earned will be taxed according to the Income Tax Withholding Table and have “additional alien tax” withheld. Tax treaty benefits for non-residents for tax are taken on forms 8233 and Revenue Procedure Statement. Click here for country list.
  • State taxes – depending on time/dollar limits of treaty, may not pay any taxes. If limited by dollar (student), any dollars earned after the limit is reached are taxable according to the Illinois rules. If limited by time, once the time limit is expired, dollars earned will be taxed according to the Illinois rules (4.95%).
  • Social Security Tax – Is exempt from this tax under IRS code: 3121(b)(19). Certain visa statuses are NOT exempt from this tax regardless of residency status (H-1B, J-2, O-1, and TN).
  • Medicare Tax – Is exempt from this tax under IRS code: 3121(b)(19). Certain visa statuses are NOT exempt from this tax regardless of residency status (H-1B, J-2, O-1, and TN).

Taxes for Foreign Scholarship Stipend/Fellowship

Residents for Tax without a Tax Treaty

  • Treated just like a US citizen is, tax wise
  • Federal taxes – not withheld at source. Will be required to report and remit taxes on this income when filing a US tax return. Will receive a letter from Payroll Services at year end. Individuals may be required to submit an Estimated Quarterly Tax Deposit based on amount of taxed owed
  • State taxes – not withheld at source. Will be required to report this income when filing a US tax return. Individuals may be required to submit an Estimated Quarterly Tax Deposit based on amount of taxed owed
  • No FICA required

Residents for Tax with a Tax Treaty:

  • Federal taxes – no taxes will be withheld. Scholarship/Fellowship Stipend is reportable in the US, although there will be no tax liability in the US. Will receive form 1042-S at year end
  • State taxes – no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the US
  • No FICA required
  • Tax Treaty benefits are taken on form W-8BEN. Click here for country list

Nonresidents for Tax without a Tax Treaty

  • Federal taxes – taxes will be withheld at a rate of 14% for F and J visa holders, all others = 30%. Will receive form 1042-S at year end
  • State taxes – not withheld at source. Will be required to report this income when filing a US tax return. Individuals may be required to submit an Estimated Quarterly Tax Deposit based on amount of taxed owed
  • No FICA required.

Nonresidents for Tax with a Tax Treaty

  • Federal taxes – no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the US. Will receive form 1042-S at year end
  • State taxes – no taxes will be withheld. Stipend is reportable in the US, although there will be no tax liability in the US
  • No FICA required
  • Tax Treaty benefits are taken on form W-8BEN. Click here for country list

Taxes for Foreign Independent Contractor Services

Residents for Tax

  • Treated just like a US citizen is, tax wise.
  • Federal taxes – not withheld at source. Will be required to report and remit taxes on this income when filing a US tax return. Will receive form 1099 (if annual earnings are over $600 at year end). Individuals may be required to submit an Estimated Quarterly Tax Deposit based on amount of taxed owed
  • State taxes – not withheld at source. Will be required to report this income when filing a US tax return. Individuals may be required to submit an Estimated Quarterly Tax Deposit based on amount of taxed owed

Nonresidents for Tax without a Tax Treaty

  • Federal taxes – taxes will be withheld at a rate of 30%. Will receive form 1042-S at year end
  • State taxes – not withheld at source. Will be required to report this income when filing a US tax return. Individuals may be required to submit an Estimated Quarterly Tax Deposit based on amount of taxed owed

Nonresidents for Tax with a Tax Treaty