Federal Taxation of Aliens Working in the United States Page: 4 of 6
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citizens and resident aliens.14 Income that is not effectively connected may not be reduced
by most deductions and is generally taxed at a flat rate of thirty percent.5 Nonresident
aliens file a return using the Form 1040NR series and are subject to the same collection
procedures as U.S. citizens and resident aliens. Additionally, nonresident aliens are
generally subject to withholding requirements on personal service compensation and non-
effectively connected income.16
There are limited circumstances in which a nonresident alien's U.S. source income
is not subject to U.S. taxation. For example, some interest income that is not effectively
connected with a U.S. trade or business (e.g., foreign portfolio interest) is exempt from
U.S. tax." Compensation for services performed in the United States is not subject to
U.S. tax if the services are for a foreign employer or office, the alien is in the United
States for not more than 90 days during the tax year, and the compensation does not
exceed $3000.18 A nonresident alien with an F-, J-, or Q-visa is not taxed on
compensation received from a foreign employer.19 Employees of foreign governments
and international organizations and crew members of foreign vessels and aircraft may
qualify to exempt their compensation from tax.20 Furthermore, income may be exempt
from U.S. tax under a treaty (see below).
Sailing permit. Aliens leaving the United States are generally required to obtain
a certificate of compliance (i.e., a sailing permit) from the IRS that shows the individual
"has complied with all the obligations imposed upon him by the income tax laws."21 For
aliens who attempt to leave without obtaining the permit, the IRS may subject them to
examination at the point of departure and require payment of any tax due if its collection
would be jeopardized by the departure. Aliens that may be exempt from the permit
requirement include employees of international organizations and foreign governments;
students and trainees with F-, H-, J-, and M-visas; military trainees; visitors, including
those on B-1 or B-2 visas; aliens in transit through the United States on a C-1 visa; and
commuters from Canada and Mexico.22
14 IRC 871(b) and 873. Examples of nonresident aliens being subject to different rules than
U.S. citizens and residents are that nonresident aliens may not claim the standard deduction, more
than one personal exemption, or the earned income credit.
15 IRC 871(a) and 873.
16 IRC 1441 and 3402; 26 CFR 1.1441-4(b)(1). The rate of withholding on compensation
for personal services is the applicable graduated income tax rate, although self-employed
individuals may be subject to withholding at a flat 30% rate. The rate of withholding on non-
effectively connected U.S. source income is 30% unless (a) the 14% rate applies for qualifying
income received by nonresident aliens with F-, J-, M-, and Q-visas or (b) there is a lower rate
under an income tax treaty.
17 IRC 871(h) and (i).
18 IRC 861(a)(3) and 864(b)(1).
19 IRC 872(b)(3).
20 IRC 861(a)(3), 872, and 893.
21 IRC 6851(d).
22 26 CFR 1.6851-2.
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Federal Taxation of Aliens Working in the United States, report, February 6, 2004; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc817545/m1/4/: accessed October 20, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.