We have received numerous questions regarding social security numbers and the need for tax withholdings on international staff. While some questions on this topic can be answered clearly, others are more difficult. ACA has reviewed interpretations provided by legal counsel from some of the staff placement organizations. We have also reviewed information provided by APCO, ACA’s legislative monitoring service. All sources were in contact with IRS officials and highly placed officials involved in Immigration. What follows are the basic rules on the need for a social security number and filing Form W-4 with the IRS. The various sources used were in agreement in all areas except whether or not a nonresident alien on J-1 visa can file for exempt status (see below).
Taxpayer Identification Numbers
All nonresident aliens who have any income must have a taxpayer identification number. The participant must apply in person to an official of the Social Security Administration Office for a United States Social Security number or I-10 number and file a tax return. Employers can be penalized under Section 109 of the Internal Revenue Code for failing to include identification numbers on reports to the Internal Revenue Service.
Theoretically, the Social Security Administration won’t issue a number of anyone who can’t participate in their benefit system. However, people working the U.S. with a J-1 visa for a short period of time, or nonresident aliens are considered to be potential participants in the social security benefit system. They may return to the U.S. to work in the future, and therefore, have potential to participate.
From experience, camp directors report that Social Security Administration (SSA) offices have been inconsistent and sometimes refuse to issue a social security number to the participant. The SSA will issue a standard letter when they refuse to issue a social security number. The nonresident alien may then contest the refusal by asking to see the "Evidence Manual" present in all Social Security Administration offices, which states all nonresident aliens with J-1 visas are to receive a social security number. Or the participant may take the refusal letter to the IRS in order to receive an I-10 number.
Federal Income Tax Withholding
All nonresident alien J-1 visa summer camp participants are exempt from both FICA and FUTA taxes. The IRS does not have a form for claiming these exemptions. Therefore employers should attach a statement to both Form 940 (FICA) and Form 941 (FUTA) stating that participants are not subject to FICA or FUTA withholding because of their J-1 status.
There is no federal withholding if the international summer camp staff will clearly earn less than the one federal withholding allowance ($2,750) and will not return or remain in the United States more than thirty days past the date on the IAP-66 form. Though the participant may not owe any taxes, he or she is still required to file. Participants’ taxable income includes all pocket money, wages, and stipends. It does not include the value of meals, lodging, travel expenses for business, or employer-provided health and accident insurance.
Standard tax tables + $4 per pay period applies if the international summer camp staff member will earn more than the federal withholding allowance ($2,750) or plans to remain in the United States more than thirty days past the date on the IAP-66 form.
IRS Form W-4
Employers must require all international camp staff to complete IRS Form W-4. The international camp staff on a J-1 visa must check "single" in box 3 on the W-4 regardless of their marital status. Additionally, he or she may claim only one withholding allowance on line 5. International camp staff on J-1 visa may not claim exempt status on line 7. They are allowed only single status and only one personal exemption. (Participants from Canada, Mexico, American Samoa, Korea or Japan may claim additional personal exemptions due to tax treaties.)
However, tax counsel advised at least one placement agency that participants who will make less than the $2,750 personal exemption should be permitted to file exempt status on line 7 of the Form W-4. ACA has been unable, despite numerous attempts to do so, to confirm this position with the IRS.
IRS Form W-2
The employer is required to provide W-2 forms to any of the participants who are compensated. Though generally required to furnish a Form W-2 to employees by January 31, a participant may submit a written request that you provide one earlier. Upon receiving the written request, the employer must furnish the Form W-2 within thirty days. It is recommended that you furnish the Form W-2 to the participant at the end of your camp season to ensure they have it before leaving the United States.
For additional information, review the following publications from the IRS, available on the IRS Web site at www.irs.gov or by calling 800-829-3676.
Form W-4 Form 1040NR
Form W-2 Form 1040NR-EZ
519 U.S. Tax Guide for Aliens
901 U.S. Tax Treaties
515 Withholding of Tax on Nonresident Aliens and Foreign Corporations
Originally published in the 1999 Fall issue of The CampLine.