Recent changes in Internal Revenue Service regulations will require MIT to withhold, effective January 1, 2000, additional federal income tax amounts from salary/wage payments made to certain nonresident alien students and scholars.
The additional amounts to be withheld are $7.60 for nonresident alien employees paid on a weekly basis and $33.10 for nonresident alien employees paid monthly.
This additional withholding is intended to compensate for the fact that nonresident alien taxpayers are not eligible to reduce their income by the "standard deduction" amount when filing their year-end federal tax returns, as US citizens and resident aliens are. This means that a nonresident alien taxpayer will, in most situations, owe a small amount of federal income tax to the US government when filing his or her year-end federal tax return.
The IRS prefers to be in a position where the US government owes the nonresident alien taxpayer a small refund. By requiring the employer to withhold the additional amount, the IRS expects it will be in this position.
There are several exceptions to this regulation:
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ Nonresident alien taxpayers' salaries that are covered by a tax treaty are not subject to this additional income tax withholding.
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ Nonresident alien taxpayers from India are not subject to this additional withholding because the tax treaty with India allows for the reduction of income by the standard deduction amount.
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ Most nonresident alien taxpayers are allowed to claim one withholding allowance. Those who do claim their one withholding allowance will be subject to the additional tax withholding. Those who do not claim their one withholding allowance will not be subject to the additional withholding.
People with questions about this new tax withholding regulation should contact Stephen Connelly in the Payroll Department at x2-2794.
A version of this article appeared in MIT Tech Talk on January 12, 2000.