In order to comply with Federal (Internal Revenue Service and Treasury Department) and State (Franchise Tax Board) tax rules and regulations, the Auxiliary Organizations (Associated Students, Student Center, Franciscan Shops, and the University Corporation, SF State) must comply with these procedures when employing nonresident aliens. The Chancellor’s Office requires all Auxiliary Organizations of the CSU comply with the Internal Revenue Code, California Revenue and Taxation Code, and California State University policies and procedures regarding nonresident alien taxation issues. These procedures are intended to assist Auxiliary Organizations when employing or appointing nonresident alien employees, including students. These procedures for nonresident aliens are in addition to all current hiring/payment procedures required by each Auxiliary Organization.
Each Organization must determine whether the newly hired employee is a U.S. Citizen, Permanent Resident or Nonresident Alien by administering the Federal Form I-9 – Employment Eligibility Verification.
- If the employee is a US Citizen or Permanent Resident Alien, the Organization will follow their normal hiring procedures.
- If the employee is a Nonresident Alien, the Organization must request the employee to:
- Make an appointment with the Tax Specialist in Internal Audit as soon as possible to complete the SFSU Foreign National Information form, and;
- Provide the necessary supporting documents at the time of the appointment with the Tax Specialist.
At the appointment time, the Tax Specialist will review the documents (SFSU Foreign National Information and supporting documents), and discuss with the employee if he/she qualifies for a tax treaty exemption to complete additional Federal forms, if applicable.
If a Tax Treaty Benefit is available request the employee to sign Form 8233 Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien based on the tax treaty benefit available to the employee. Sign an additional W-4 form that indicates restricted withholding rate. The W-4 will be effective as soon as the NRA employee reaches the maximum tax treaty benefit.
If a Tax Treaty Benefit is not available:
Request the employee to complete the W-4 Employee Withholding Allowance Certificate (restricted withholding, see detailed procedures).
- Stamp the W-4 and Form 8233 indicating that Internal Audit has discussed Federal and State tax withholding rates with the employee.
The Tax Specialist returns the original W-4 and Form 8233 to the hiring Organization by way of the employee to complete the hiring process.
The Organization will complete the hiring process (e.g. any additional paperwork needed to be completed).
The Auxiliary Organization -- Associated Students, Franciscan Shops, Student Center, and the University Corporation, SFS (the Organization) -- will determine if the staff or student employee is a U.S. Citizen or Permanent Resident Alien or Nonresident Alien by administering the Federal Form I-9 -- Employment Eligibility Verification. All newly hired employees must have in their possession a Social Security Number or an Individual Taxpayer Identification Number (ITIN). Each organization is responsible for obtaining and verifying appropriate documents and certify the I-9.
U.S. Citizen or Permanent Resident Alien (green card holder):
- If the I-9 indicates (the employee will self-identify themselves either to be a U.S. Citizen or Permanent Resident Alien by completing this form) that the employee is a valid U.S. Citizen or Permanent Resident Alien (green card holder), and the employee provides appropriate verification documents, then the Organization follows normal internal employment procedures.
Nonresident Aliens (NRA):
- If the I-9 indicates that the employee is a NRA based on the information or documents provided, the Organization will Request the employee to make an appointment with the Tax Specialist in Internal Audit as soon as possible to discuss Federal tax treaty benefits and determine the proper tax withholding the employee needs to enter on the W-4 Employee’s Withholding Allowance Certificate form.
- Request the employee to complete the Foreign National Information Form -- all employees who self-identify as a nonresident alien must complete this form (designed to collect information necessary to determine the U.S. tax residency status of non-U.S. citizens) before receiving any wage payment(s) from the Organization.
- Request the employee to bring the following documents to his/her appointment with the Tax Specialist: W-4 form (Employee’s Withholding Allowance Certificate); Foreign National Information Form; Copy of Passport page showing picture, name, and number; Copy of the I-94 - Arrival/Departure Record (a small white card in Copy of U.S. Visa;side the passport); Copy of I-20 or IAP-66; Social Security or Individual Taxpayer Identification Card and Employment Eligibility Verification form (EEV).
The Organization must advise the employee to contact the Tax Specialist as soon as possible to avoid any delays in completing all the necessary paperwork. During the meeting of the Tax Specialist and NRA employee, the Tax Specialist will:
- Review and discuss the SFSU Foreign National Information Form along with all the supporting documents.
- Determine whether some or all of the wages of the employee are exempt from income and FICA tax withholding under a federal income tax treaty. If a Federal tax treaty exemption is available Internal Audit will have the employee complete additional Federal forms.
- The Tax Specialist will provide all the forms.
[Some of the Federal required forms need the approval of the Internal Revenue Service (IRS) prior to granting a federal tax treaty exemption. In addition, the IRS requires SFSU to wait 10 days before granting the federal tax treaty exemption. There may be occasions when the hiring process might be delayed based on the IRS requirement. Internal Audit will coordinate this activity with the IRS as soon as possible.]
Request the employee to:
- Sign Form 8233 Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien based on whether any tax treaty benefit is available to the employee. Sign an additional W-4 form that indicates restricted withholding rate. The Organization will hold this W-4 and will make it effective as soon as the NRA employee reaches the maximum tax treaty benefit. The restricted tax withholding for NRA’s is: Federal – “single with zero allowance” and State – single with one allowance. It is the NRA employee’s decision whether to take advantage of a federal tax treaty; it is not mandatory. If the employee decides not to take advantage of a tax treaty benefit available, he/she must sign page 2 of the Foreign National Information Form, line number 22.
Note: A Federal tax treaty exemption is only valid for the calendar year it’s granted. The NRA employee will be requested to renew Form 8233 annually. The Organization is responsible for informing their employees and should work with the Tax Specialist regarding this requirement. If a federal tax treaty is not available or if the employee declines to take advantage of the tax treaty the Tax Specialist will request the employee to complete the W-4 Employee Withholding Allowance form to ensure that the proper Federal and State income taxes will be withheld.
Note: California tax regulations do not mirror federal income tax treaties; therefore, California taxes will be withheld. For nonresident aliens, the Internal Revenue Service requires special tax withholding rates and the Franchise Tax Board requires that California “Personal Income Taxes” (PIT) are withheld from wages. The allowance and exemption claimed on the W-4 form for Federal tax withholding may also be used for California PIT withholding. The W-4 form must be completed with the following information: NRA Federal Withholding Requirements:
Must check Single marital status (regardless of actual marital status):
- Claim only one allowance.
- With an additional withholding of $87.50 semimonthly; $ 80.80 bi-weekly; or $175.00 per month.
- IMPORTANT: The employee cannot claim EXEMPT withholding status.
NRA State Withholding Requirements:
- California income tax called Personal Income Tax (PIT) is to be withheld once the employee is paid over $100 in wages in a calendar quarter. California does not recognize any federal tax treaty exemptions.
- If the NRA employee requests a different State tax withholding rate than the Federal rate, he/she will need to indicate this change on a DE 4 Employee’s Withholding Allowance Certificate (special treatment of state allowances). If the NRA employee does not request special treatment of state allowances, the Federal rate will be used as indicated in W-4 form. Stamp the W-4 and Form 8233 indicating on the form the proper federal and state tax withholding status.
- The Tax Specialist will request the NRA employee to return the original W-4 and/or Form 8233 (in lieu of W-4) (completed and stamped ) to the Organization and complete the hiring process.
Note: Auxiliary Business Services (ABS) has requested the Tax Specialist to provide the original W-4 and/or Form 8233 to the accountants of Associated Students and Student Center. The accountants of ABS will provide a copy of the originals to Associated Students and Student Center. The Organization will complete the hiring process (e.g. any additional paperwork needed to be completed). The procedures above are the steps needed to employ NRA staff and students. The above procedures do not fully describe the entire process but do outline the necessary steps that Auxiliary Organizations need to adhere to. Should any of the Auxiliary Organizations need further clarification on the above procedures or need additional information regarding employing nonresident alien staff, they should contact Internal Audit and speak to Young Kim, Tax Specialist at (415) 338-2325. Internal Audit developed these procedures in conjunction with the Auxiliary Organizations.