Wednesday, February 2, 2011

Taxing Nonresident Aliens

The IRS is reminding us in Notice 2011-12 that taxing the wages of nonresident aliens has returned to the old method.  The extra steps used in 2010 because of the change to the tax tables because of the Recover Act no longer applies.

 Basic info can be found in the Circular E.  The main information can be found in Notice 2011-12 on the IRS website and it will appear in the Internal Revenue Bulletin 2011-8 which is dated Feb. 22, 2011.

You now add the amount listed on the chart for 2011 to the employee's wages and then use the percentage tables or wage bracket tables as usual. Make sure to deduct the amount added from the chart before computing any other taxes such as social security or Medicare.  The amount is not wages, is not income to the employee and does not appear on the Form W-2.  The additional amount is simply an adjustment to the tax chart.

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