EPY: Non-Resident Alien Federal Withholding is Zero if Wages Below Allowance Amount
(Doc ID 2480326.1)
Last updated on MAY 08, 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.
Non-resident aliens making less than the IRS allowance amount for 1 withholding do not have federal withholding tax withheld.
However 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
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.
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