This page provides an overview of the terms and procedures of which you should be familiar when processing a tax record for a non-resident in GLACIER.
Contents
- Non-resident Versus Resident Status
- Substantial Presence Test
- Income Tax Withholding for Foreign Payments
- Payments to California Non-Residents
- Services Performed Outside the U.S. by a Foreign Person
1. Non-resident Versus Resident Status
A Non-resident |
A Resident |
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2. Substantial Presence Test
A foreign person will be considered a U.S. resident for tax purposes if he/she meets the substantial presence test for the calendar year. The test must be applied each year that the individual is in the U.S.
To meet the test, a foreign person must:
- Be physically present in the U.S. for at least 31 days during the current year, and
- Be physically present 183 days during the three-year period that included the current year and the two years immediately before that, counting:
- All the days the individual was present in the current year, and
- 1/3 of the days the individual was present in the 1st year before the current year, and
- 1/6 of the days the individual was present in the 2nd year before the current year
F and J student visa holders are to exclude five calendar years of presence for purposes of the substantial presence test. J non-student visa holders are to exclude two years.
3. Income Tax Withholding for Foreign Payments
Services:
- Federal income tax is withheld at 30% unless the visitor is exempt under a tax treaty
- California State income tax will be withheld at the rate of 7% from any payment over $1,500
Foreign Employees:
- Federal tax withholding is restricted to Single with 0 or 1 allowance unless the employee is exempt under a tax treaty or is a resident for tax purposes.
- State tax withholding has no restrictions.
4. Payments to California Non-Residents
Individuals who are residents of another state but come into California to perform a service and will be paid over $1,500 are subject to California State Income Tax at the rate of 7%.
- A Form 592B will be issued by the university which will show the gross paid and tax withheld.
- The individual is responsible for filing a Form 540NR on or before April 15.
- Withholding can only be waived by the California Franchise Tax Board.
5. Services Performed Outside the U.S. by a Foreign Person
Payments for services done outside of the U.S. by a foreign person are not reportable or taxable in the U.S.
If part of the service was performed outside of the U.S. and part of it was performed in the U.S., the individual must register in Glacier and provide the necessary documents as instructed through Glacier.