Form 8233

What Is Form 8233?

Form 8233 is a form issued by the Internal Revenue Service (IRS) for nonresident alien (NRA) employees to file. This form helps NRA employees claim an exemption from Federal Income Tax Withholding (FITW) based on international tax treaties between the US and their country of residence.

What Is a Nonresident Alien?

A nonresident alien is any person who isn’t classified as a US citizen or considered a US resident within the calendar year. To be considered a US resident an individual must pass either the green card test or the substantial presence test.

For tax purposes, an employee may also be considered a nonresident alien if they qualify as a resident of a treaty country or are a legal resident of the following areas:

• American Samoa
• Commonwealth of the Northern Mariana Islands
• Guam
• Puerto Rico
• US Virgin Islands

What Is Exemption from Withholding?

Exemption from withholding is a type of tax exemption. Exemptions usually only apply to certain types of income and sometimes can be claimed as part of a tax treaty agreement.

Exempt income reduces the amount of taxes an individual must pay to the federal government.

How Does a Tax Treaty Work?

The US has tax treaties with multiple countries. Under these treaties, residents of foreign countries receiving compensation for personal services in the US are taxed at a reduced rate or exempt from certain taxes on their income. These reduced rates and tax exemptions vary by country and income items.

Likewise, US residents and citizens working in these foreign countries are eligible for income tax deductions or exemptions.

Form 8233 Submission to the IRS

NRA employees must provide a Taxpayer Identification Number (TIN) when filling out Form 8233.

In most cases, their TIN is a Social Security Number (SSN). But if an employee doesn’t have or isn’t eligible for an SSN, they must apply for an Individual Taxpayer Identification Number (ITIN) by filing Form W-7 and providing proof they’re ineligible for an SSN. This proof can be a rejected Form SS-5.

It can take several weeks for the IRS to notify an employee of their ITIN status. In the meantime, they may attach a copy of their W-7 and proof to Form 8233 and submit it to their employer.

What Do Employers Need to Know about Form 8233?

Employers must review Form 8233 and provide their information and signature in Part IV—Withholding Agent Acceptance and Certification. The form must be mailed or faxed to the IRS within five days of signing and approval. Be sure to provide a copy of Form 8233 to your NRA employee and keep a copy for yourself.

If the IRS rejects your employee’s Form 8233, you must immediately begin withholding the applicable taxes from their paychecks.

FAQ: What Are the Key Terms of Form 8233?

Knowing these key terms can help you better understand Form 8233:

• NRA employee: Any employee who isn’t a US citizen or US resident is considered an NRA. They’re subject to US taxes on income from US sources.
• Green card test: An individual with a Permanent Resident Card (a green card) from the US Citizenship and Immigration Services passes this test.
• Substantial presence test: An individual who’s physically present in the US for certain minimum periods passes this test.
• Independent personal services: These are services a self-employed NRA performs as an independent contractor.
• Dependent personal services: These are services an NRA performs as an employee working for an employer.
• Tax treaties: Two countries establish income tax rules and regulations for their citizens and residents in these agreements
• Withholding agent: This is any individual who can control or is in custody of the amount of withholdings an NRA is subject to on their income.
• Beneficial owner: In most cases, this is the individual required to include the gross income payment on a tax return.
• Taxpayer Identification Number (TIN): A TIN is any identification number used by the IRS. This may include a Social Security Number (SSN), Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), Taxpayer Identification Number for Pending US Adoptions (ATIN), and Preparer Taxpayer Identification Number (PTIN).

For more information on these key terms, you can check out the Form 8233 instructions.