My Oracle Support Banner

EPY: Non-Resident Alien Federal Withholding is Zero if Wages Below Allowance Amount (Doc ID 2480326.1)

Last updated on JANUARY 31, 2019

Applies to:

PeopleSoft Enterprise HCM Payroll for North America - Version 9.1 to 9.2 [Release 9]
Information in this document applies to any platform.

Symptoms

On : 9.1 version, Core Processes

 

ACTUAL BEHAVIOR
--------------------
Non-resident aliens making less than the IRS allowance amount for 1 withholding do not have federal withholding tax withheld.


EXPECTED BEHAVIOR
-----------------------
For non-resident aliens, federal tax need to be deducted even if the income is less than the withholding amount.

Per IRS notice 1036 (https://www.irs.gov/pub/irs-pdf/n1036.pdf)

Withholding Adjustment for Nonresident Aliens

Instructions.  To figure how much income tax to withhold from the wages paid to a nonresident alien employee performing services in the United States, use the following steps.

Step 1.  Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period.
Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only


Payroll Period                            Add Additional

 Weekly                                        $ 151.00
 Biweekly                                        301.90
 Semimonthly                                  327.10
 Monthly                                         654.20
 Quarterly                                   1,962.50
 Semiannually                             3,925.00
 Annually                                    7,850.00
 Daily or Miscellaneous                   30.20
(each day of the payroll period)

Step 2.  Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding.


STEPS TO REPRODUCE
-------------------------
The issue can be reproduced at will with the following steps:


1. Hire a non-resident alien with a compensation amount less than the IRS amount for 1 allowance for their pay frequency.
2. Configure tax data, set up with 1 allowance.
3. Run a payroll/paycheck for the employee, paying them under the IRS amount for 1 allowance.
4. Review paycheck details.
5. No federal tax is withheld.


BUSINESS IMPACT
---------------------
The issue has the following business impact:
Due to this issue, no federal tax will be withheld for non-resident aliens whose income is less than the minimum federal withholding allowance.

Cause

To view full details, sign in with your My Oracle Support account.

Don't have a My Oracle Support account? Click to get started!


In this Document
Symptoms
Cause
Solution
References


My Oracle Support provides customers with access to over a million knowledge articles and a vibrant support community of peers and Oracle experts.