Guide to Global Payroll Management - 2020 - D-169

Page 2 of 5

13:43 - 12-Sep-2018

Fileid: ... ns/I8233/201809/A/XML/Cycle09/source

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Appendix D--Federal Forms and Instructions

the requested benefits under the terms of
the tax treaty.
If you are claiming a benefit under
either the income from employment/
dependent personal services article or the
income from independent services/
business profits article of the treaty, you
must be a resident of the treaty country.
However, if you are claiming a benefit
under the student/trainee or teacher/
researcher article of a treaty, you generally
only need to have been a resident of the
treaty country immediately before (or at
the time) you came to the United States.

Compensation for Independent
Personal Services

Independent personal services are
services performed as an independent
contractor in the United States by a
nonresident alien who is self-employed
rather than an employee. Compensation
for such services includes payments for
contract labor; payments for professional
services, such as fees to an attorney,
physician, or accountant, if the payments
are made directly to the person performing
the services; consulting fees; and
honoraria paid to visiting professors,
teachers, researchers, scientists, and
prominent speakers.

Business profits. Certain treaties do not
have an independent personal services
article. Payments for independent
personal services may be covered under
the business profits article of an applicable
income tax treaty. If you are eligible to
claim exemption from withholding on this
type of income, complete and give Form
8233 to the withholding agent.
Under certain treaties, such as
those with Canada, India, and
CAUTION Portugal, independent contractors
who do not have a fixed base in the United
States may still be taxable on their income
for services performed in the United
States if they stay in the United States for
more than a specified period of time
(generally 90 or 183 days, depending on
the treaty). See, for example, Article 5(9)
of the United States-Canada income tax
treaty and Article 15(1)(b) of the United
States-India income tax treaty. Often,
these contractors cannot claim an
exemption from withholding at the time of
payment because they do not know
whether their stay will exceed the
specified period.

Public entertainers. Generally, athletes
and entertainers are not exempt from tax
on income derived from their activities as
such. Most treaties have a special article
that covers them that takes precedence
over the independent personal services
and dependent personal services articles
of treaties. They may be exempt in some
treaties only if the total amount paid for a

year is below a dollar threshold. Generally,
the IRS cannot accept Form 8233
because the exemption may be based on
factors that cannot be determined until
after the end of the year. These individuals
are subject to 30% withholding from gross
income paid for personal services
performed unless they apply for a reduced
rate of withholding using Form 13930.

Required Withholding Form

For compensation you receive for
independent personal services, complete
Form 8233 to claim a tax treaty
withholding exemption for part or all of that
income.

Compensation for Dependent
Personal Services

Dependent personal services are services
performed as an employee in the United
States by a nonresident alien. Dependent
personal services include compensatory
scholarship or fellowship income (defined
later). Compensation for such services
includes wages, salaries, fees, bonuses,
commissions, and similar designations for
amounts paid to an employee.

Required Withholding Form(s)

Complete Form 8233 for compensation
you receive for dependent personal
services only if you are claiming a tax
treaty withholding exemption for part or all
of that income.
For compensation for which you are not
claiming a tax treaty withholding
exemption, use Form W-4, or you also can
calculate your withholding online with the
Withholding Calculator at www.irs.gov/
individuals/irs-withholding-calculator.
Completing your 2018 Form W-4. You
should complete your 2018 Form W-4 as
follows:
Line 2. You are required to enter a
social security number (SSN) on line 2 of
Form W-4. If you do not have an SSN but
are eligible to get one, you should apply
for it. Get Form SS-5, Application for a
Social Security Card, online at
www.ssa.gov, from your local Social
Security Administration (SSA) office, or by
calling the SSA at 1-800-772-1213.

CAUTION

You cannot enter an individual
taxpayer identification number
(ITIN) on line 2 of Form W-4.

Line 3. Check the single box
regardless of your actual marital status.
Line 5. In most cases, you should
claim one withholding allowance.
However, if you are a resident of Canada,
Mexico, or South Korea; a student from
India; or a U.S. national, you may be able
-2-

to claim additional withholding allowances.
See Pub. 519 for more information.
If you are completing Form W-4 for
more than one withholding agent (for
example, you have more than one
employer), figure the total number of
allowances you are entitled to claim (see
the previous paragraph) and claim no
more than that amount on all Forms W-4
combined. Your withholding usually will be
most accurate when all allowances are
claimed on the Form W-4 for the
highest-paying job and zero allowances
are claimed on the others.
Line 6. Write "nonresident alien" or
"NRA" above the dotted line on line 6. If
you would like to have an additional
amount withheld, enter the amount on
line 6.
Line 7. Do not claim that you are
exempt from withholding on line 7 of Form
W-4 (even if you meet both of the
conditions listed on that line).

The above instructions apply to
the 2018 Form W-4. See the 2019
CAUTION Form W-4 and instructions for
withholding that occurs in 2019.

Compensatory Scholarship or
Fellowship Income

In general, scholarship or fellowship
income is compensatory to the extent it
represents payment for past, present, or
future services (for example, teaching or
research) performed by a nonresident
alien as an employee and the
performance of those services is a
condition for receiving the scholarship or
fellowship (or tuition reduction).
Example. XYZ University awards a
scholarship to N, a nonresident alien
student. The only condition of the
scholarship is that N attends classes and
maintains a minimum level of academic
performance. The scholarship income is
not compensatory because N is not
required to perform services as an
employee as a condition for receiving the
scholarship.

Required Withholding Form(s)

Compensatory scholarship or fellowship
income is considered to be dependent
personal services income. Therefore,
complete Form 8233 for this income if you
are claiming a tax treaty withholding
exemption for part or all of that income.
For any part of this compensatory
income for which you are not claiming a
tax treaty withholding exemption, use
Form W-4 or the Withholding Calculator at
www.irs.gov/individuals/irs-withholdingcalculator. For the Form W-4, see
Completing your 2018 Form W-4, earlier.

Instructions for Form 8233 (Rev. 09-2018)

D-169

Guide to Global Payroll Management - 2020

Table of Contents for the Digital Edition of Guide to Global Payroll Management - 2020