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previous page Previous Page: Publication 519 - U.S. Tax Guide for Aliens - Withholding From Compensation
next page Next Page: Publication 519 - U.S. Tax Guide for Aliens - Income Entitled to Tax Treaty Benefits
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p519-040.htm#en_us_publink100039372

Withholding From 
Other Income(p47)


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Withholding From Other Income

Other income subject to 30% withholding generally includes fixed or determinable income such as interest (other than portfolio interest), dividends, pensions and annuities, and gains from certain sales and exchanges, discussed in chapter 4. It also includes 85% of social security benefits paid to nonresident aliens.
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Refund of taxes withheld in error on social security benefits paid to resident aliens.(p47)


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Social security benefits paid to a lawful permanent resident (green card holder) are not subject to 30% withholding. For U.S. income tax purposes, green card holders continue to be resident aliens until their lawful permanent resident status under immigration laws is either taken away or is administratively or judicially determined to have been abandoned. See Green Card Test in chapter 1. If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. You must also attach the following to your Form 1040 or 1040A.
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Other income not subject to withholding of 30% (or lower treaty) rate.(p48)


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The following income is not subject to withholding at the 30% (or lower treaty) rate if you file Form W-8ECI with the payer of the income.
Special rules for withholding on partnership income, scholarships, and fellowships are explained next.
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Tax Withheld on 
Partnership Income(p48)


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If you are a foreign partner in a U.S. or foreign partnership, the partnership will withhold tax on your share of effectively connected taxable income (ECTI) from the partnership. You may be able to reduce your ECTI subject to withholding by certain partner-level deductions. Generally, you must use Form 8804-C for this purpose. See the instructions for Form 8804-C for more information.
The withholding rate on your share of effectively connected income is generally the highest rate of tax that applies to you (35% for 2009). However, the partnership may withhold at the highest rate that applies to a particular type of income allocable to you if you gave the partnership the appropriate documentation (generally, Form W-8BEN). Long-term capital gain is an example of a particular type of income to which a highest tax rate applies. Claim the tax withheld as a credit on your 2009 Form 1040NR.
The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. A partnership that is publicly traded will withhold tax on your actual distributions of effectively connected income. In this case the partnership will give you a statement on Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.
taxmap/pubs/p519-040.htm#en_us_publink100039376

Withholding on Scholarships 
and Fellowship Grants(p48)


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Withholding on Scholarships and Fellowship Grants

There is no withholding on a qualified scholarship received by a candidate for a degree. See chapter 3.
If you are a nonresident alien student or grantee with an "F," "J," "M," or "Q" visa and you receive a U.S. source grant or scholarship that is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax at 14% (or lower treaty rate) of the taxable part of the grant or scholarship that is not a payment for services. However, if you are not a candidate for a degree and the grant does not meet certain requirements, tax will be withheld at the 30% (or lower treaty) rate.
Any part of a scholarship or fellowship grant that is a payment for services is subject to graduated withholding as discussed earlier under Withholding on Wages.
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Alternate Withholding Procedure(p48)


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Alternate Withholding Procedure

Your withholding agent may choose to use an alternate procedure by asking you to fill out Form W-4 and the Personal Allowances Worksheet (attached to Form W-4). Use the following instructions instead of the Form W-4 instructions to complete the worksheet.
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Line A.(p48)


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Enter the total of the following amounts on line A.
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Personal exemption.(p48)
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Include the prorated part of your allowable personal exemption. Figure the amount by multiplying the number of days you expect to be in the United States in 2009 by the daily exemption amount ($10.00).
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Expenses.(p48)
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Include expenses that will be deductible on your return. These include away-from-home expenses (meals, lodging, and transportation), certain state and local income taxes, charitable contributions, and casualty losses, discussed earlier under Itemized Deductions in chapter 5. They also include business expenses, moving expenses, and the IRA deduction discussed under Deductions in chapter 5.
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Nontaxable grant or scholarship.(p48)
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Include the part of your grant or scholarship that is not taxable under U.S. law or under a tax treaty.
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Line B.(p48)


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Enter -0- unless the following paragraph applies to you.
If you are a student who qualifies under Article 21(2) of the United States-India Income Tax Treaty, and you are not claiming deductions for away-from-home expenses or other itemized deductions (discussed earlier), enter the standard deduction on line B. The standard deduction amount for 2009 is $5,700.
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Lines C and D.(p48)


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Enter -0- on both lines unless the following paragraphs apply to you.
If you are a resident of Canada, Mexico, the Republic of Korea (South Korea), or a U.S. national, an additional daily exemption amount may be allowed for your spouse and each of your dependents.
If you are a resident of India who is eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you can claim an additional daily exemption amount for your spouse only if your spouse will have no gross income for 2009 and cannot be claimed as a dependent on another U.S. taxpayer's 2009 return. You can also claim an additional amount for each of your dependents not admitted to the United States on "F-2," "J-2," or "M-2" visas if they meet the same rules that apply to U.S. citizens.
Enter any additional amount for your spouse on line C. Enter any additional amount for your dependents on line D.
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Lines E, F, and G.(p48)


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No entries should be made on lines E, F, and G.
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Line H.(p48)


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Add the amounts on lines A through D and enter the total on line H.
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Form W-4.(p48)


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Complete lines 1 through 4 of Form W-4. Sign and date the form and give it with the Personal Allowances Worksheet to your withholding agent.
If you file a Form W-4 to reduce or eliminate the withholding on your scholarship or grant, you must file an annual U.S. income tax return to be allowed the exemptions and deductions you claimed on that form. If you are in the United States during more than one tax year, you must attach a statement to your yearly Form W-4 indicating that you have filed a U.S. income tax return for the previous year. If you have not been in the United States long enough to be required to file a return, you must attach a statement to your Form W-4 saying you will file a U.S. income tax return when required.
After the withholding agent has accepted your Form W-4, tax will be withheld on your scholarship or grant at the graduated rates that apply to wages. The gross amount of the income is reduced by the amount on line H of the worksheet and the withholding tax is figured on the remainder.
You will receive a Form 1042-S from the withholding agent (usually the payer of your grant) showing the gross amount of your taxable scholarship or fellowship grant less the withholding allowance amount, the tax rate, and the amount of tax withheld. Use this form to prepare your annual U.S. income tax return.
previous pagePrevious Page: Publication 519 - U.S. Tax Guide for Aliens - Withholding From Compensation
next pageNext Page: Publication 519 - U.S. Tax Guide for Aliens - Income Entitled to Tax Treaty Benefits
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication