International Tax

International Aspects of U.S. Income Tax Withholding on Wages and Service Fees (Portfolio 6820)

  • This Portfolio analyzes the U.S. wage withholding rules (for income tax purposes) that apply to aliens working in the United States, and to U.S. citizens and certain aliens working in foreign countries.

Description

Bloomberg Tax Portfolio, International Aspects of U.S. Income Tax Withholding on Wages and Service Fees, No. 6820, analyzes the U.S. wage withholding rules (for income tax purposes) that apply to aliens working in the United States, and to U.S. citizens and certain aliens working in foreign countries. Also discussed are the rules regarding the 30% U.S. withholding tax on U.S.-source service fees paid to self-employed nonresident alien individuals, and U.S. information reporting requirements concerning wages and service fees paid to employees and self-employed individuals in an international context.

In general, wage withholding is not imposed on remuneration paid to an employee for services performed outside the United States if the employee is a nonresident alien, but withholding tax may apply (subject to numerous special rules) if the employee is a resident alien or a U.S. citizen.

Of increasing importance is the question of wage withholding on fringe benefits, and on bonuses and deferred compensation paid to international employees either while they are still working for their employer, or after their termination from service. Numerous special withholding rules are applied which attempt to match the amount of withholding tax with the employee’s substantive liability.

In the case of service fees paid to a self-employed individual who is not an employee, withholding is generally required only in the case of fees paid to nonresident aliens with respect to services rendered within the United States. A number of special exceptions may apply, however. In the case of service fees paid to self-employed individuals who are resident aliens or U.S. citizens, withholding is required only in the case of “backup” withholding.

This Portfolio may be cited as Bissell, 6820 T.M., International Aspects of U.S. Income Tax Withholding on Wages and Service Fees.

Table of Contents

I. Introduction
II. U.S. Income Tax Withholding and Reporting on Employees — General Structure
III. U.S. Income Tax Withholding and Reporting on Self-Employed Individuals — General Structure
IV. U.S. Citizens and Resident Aliens Working in the United States as Employees
V. Nonresident Aliens Working in the United States as Employees
VI. U.S. Citizens and Resident Aliens Working Outside the United States As Employees
VII. Nonresident Aliens Working Outside the United States as Employees
VIII. Self-Employed U.S. Citizens and Resident Aliens Working in the United States
IX. Self-Employed Nonresident Aliens Working in the United States
X. Self-Employed U.S. Citizens and Resident Aliens Working Outside the United States
XI. Self-Employed Nonresident Aliens Working Outside the United States
XII. Withholding and Reporting on Fringe Benefits
XIII. Withholding on Bonuses and Deferred Compensation
XIV. Special Computational Problems for Employees
XV. Tax Payment and Filing Procedures

bissell_thomas_2015
Thomas Bissell
Partner
PricewaterhouseCoopers LLP