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    Set up Nonresident Alien (NRA) tax withholding for foreign employee

    Article ID: 1000086

    Overview

    This article provides information about how to set up a foreign employee as a nonresident alien (NRA) for federal income tax withholding.

    Expected Outcome

    You will set up the foreign employee at the federal NRA rate.

    Assumptions

    • You have the latest QuickBooks and you have the latest tax table version.
    • The employee must qualify as an NRA.

    Details

    What do I need to know about withholding for nonresident aliens (NRAs)?

    • Employees with NRA status must pay federal taxes at the NRA rate.
    • NRA employees must complete the IRS Form W-4 in a specific manner (see IRS Publication 15).

    How do I know if an employee should be set up to withhold taxes at the NRA rate?

    Read IRS Publication 515 and Publication 15 to determine whether you must set up your employee with NRA status.

    What do I do when an employee enters NRA or Nonresident Alien on their W-4?

    Ensure the employee is set up to for federal income tax withholding at the NRA rate.

    How should an NRA employee complete Form W-4?

    The employee should:
    • Not claim exemption from income tax withholding.
    • Request withholding as if they are single, regardless of their actual marital status.
    • Claim only one allowance (if the NRA employee resides in Canada, Mexico, or Korea, they may claim more than one allowance).
    • Write "Nonresident Alien" or "NRA" above the dotted line on line 6 of Form W-4.

    Are all NRAs subject to the new procedure?

    NRA students from India and business apprentices from India are not subject to this procedure.

    How do I set up NRA withholding for a NEW or EXISTING employee?

    1. Update QuickBooks to the latest release.
    2. Download the latest payroll updates.
    3. Close QuickBooks and then reopen it.
      In QuickBooks, choose Employees > Payroll Setup.
    4. Click Continue, Next or Finish until you reach the Employee Setup section of Payroll Setup.
    5. In the Set up your Employees window, click Continue.
    6. From the Employee list, select the employee's name and click Edit.
    7. Select Next until you reach the Enter federal tax information window.
    8. Select Single regardless of the employee's actual marital status to ensure proper withholding.
      NOTE: If you later change this employee's marital status to Married, Married using Single Rate, or Don't Withhold, you will receive an error message in Payroll Setup. The filing status for all employees subject to NRA federal withholding must be Single.
    9. Enter allowances; however, Intuit recommends you set allowances to 1. Only NRAs who are residents of Canada, Mexico, or Korea may claim more than one allowance.
    10. Enter any extra withholding amounts.
    11. In the Nonresident Alien Withholding area, select Withhold as Nonresident Alien and click Next.
    12. Continue the Payroll Setup process by selecting Next, Continue, or Finish until you reach the Go to the Payroll Center to manage your payroll window. Select Go to the Payroll Center.

    What do I do if I have an EXISTING payroll item already set up using the prior withholding calculation for NRAs?

    • You must inactivate any payroll item(s) set up using the NRA withholding calculation for a paycheck (that is, a payroll item named Nonresident Alien - Biweekly).

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