For tax purposes, nonresident alien employees are taxed at different, and generally higher, rates on income than are resident alien and citizen employees. Off-campus employers should be aware of these tax considerations when processing income related to nonresident alien employees, as well as the specific documents authorizing work in the U.S. and needed to process employment paperwork.

For questions, please reach out to the Nonresident Alien Taxation Office.

Student Employment Authorizations

International student employees will have a number of documents and authorizations that outline their capacity to work in the United States and assist with completing the necessary paperwork for employment and tax withholding. These documents and authorizations vary depending on the student’s visa status.

International students with an F-1 visa status can have authorization to work in the United States under a few different provisions of the F-1 visa type. The different provisions have different documentation requirements and employment conditions.

Due to Economic Necessity

  • Employment authorization is provided by the Department of Homeland Security (DHS) on an Employment Authorization Document (EAD).
    • The EAD is a small card containing the student's photograph and the dates of employment eligibility.
    • The student must have an EAD in-hand to be eligible for employment.
    • The Employment Authorization Document is valid for one year.
    • The student may not be employed beyond the end date specified in the document, even if an application has been submitted for a renewal.
  • Employment is limited to 20 hours per week when school is in session. Work may be full-time during authorized vacations, including summer (even if the student is enrolled for summer classes).
  • Students may work for any employer and may change employers without notification to U.S. Immigration and Naturalization Services.
  • For I-9 purposes, students with work authorization under this provision are most likely to provide the INS-issued EAD as a List A document to verify both identity and employment authorization.

Optional Practical Training

  • Employment authorization is provided by the Department of Homeland Security (DHS) on an Employment Authorization Document (EAD).
  • Students may work either full-time or part-time employment in the student's field of study.
  • Students most often use optional practical training for full-time employment near or after completion of their degree program.
  • Employment may not be authorized for more than 12 months of full-time optional practical training. (Part-time optional practical training prior to completion of studies may be available.)
  • Students may work for any employer under this authorization and may change employers without notification to the U.S. Department of Homeland Security so long as the work is directly related to the student's field of study.

Curricular Practical Training

  • Employment authorization is provided by the designated school official.
    • No Employment Authorization Document is issued by Immigration and Naturalization Services for curricular practical training.
  • Students may work either full-time or part-time in academic-related jobs off-campus.
  • The student's I-20 ID Student Copy lists the name and location of the employer, as well as the beginning and end date of the authorization, on page 4.
  • Students may not change employers unless they have received a new employment authorization notation from the designated school official on page 4 of the I-20 ID Student Copy.
  • For I-9 purposes, students with work authorization under this provision will likely provide the I-20 ID as a List C document.
    • Employers should review page 4 of the I-20 ID to assure that the notation is valid, relates to their company, and that work is within the dates listed.
    • Students for whom the I-20 is used as a List C document must also produce a List B identity verification document.

 

Students in J-1 status may be authorized for off-campus employment depending on the authorization provided by the organization that issued the student’s Form DS-2019 (an immigration document the student used to enter the U.S. with J-1 visa status).

Due to Economic Necessity

  • Employment authorization is issued by the Responsible Officer or Alternate Responsible Officer (RO or ARO) of the organization that issued the student’s Form DS-2019.
    • Authorization must be on institutional letterhead and must spell out the terms of employment.
    • Immigration and Naturalization Services will not issue an Employment Authorization Document to a student in J-1 visa status under any circumstances.
  • Employment is limited to 20 hours per week when school is in session. Work may be full-time during authorized vacations, including summer (even if the student is enrolled for summer classes).
  • Students may work for any employer under this authorization and may change employers so long as the work is authorized by the student’s employment authorization.

Academic Training

  • Employment authorization is issued by the Responsible Officer or Alternate Responsible Officer (RO or ARO) of the organization that issued the student’s Form DS-2019.
    • Authorization letter must list the name and location of the employer.
    • Academic training work permission is job-specific, and must be consistent with the terms and conditions of the work authorization letter.

Dependents with J-2 Visa Status

Persons in J-2 status are dependents of persons in J-1 status.

  • Employment authorization may be provided by the Department of Homeland Security (DHS) on an Employment Authorization Document (EAD).
  • Dependents may work for any employer under this authorization and may change employers without notification to the Department of Homeland Security.
  • For I-9 purposes, dependents with work authorization are most likely to provide the Employment Authorization Document as a List A document to verify both identity and employment authorization.
  • Persons in J-2 status are generally not eligible for exemption from FICA withholding.

Importance of Correct Withholdings

Because of the different tax rates applied to the income of nonresident aliens, employers should ensure to withhold taxes from pay made to nonresident aliens at the correct rate, which will not be the same as the rate applied to U.S. citizen employees. Doing so will allow the employer to avoid the following inadvisable scenarios:

  1. In the event of an IRS audit, if the employer under-withheld income tax, penalties and interest will be assessed to the employer, in addition to the taxes owed. The IRS will not attempt to seek retribution from the nonresident alien employee.
  2. FICA withholding is not required for nonresident aliens in F-1 and J-1 status who are working legally. Therefore, the off-campus employer is not liable for the matching portion of FICA payments.
  3. The nonresident alien has significantly higher federal tax liability than a U.S. tax resident. When off-campus employers under-withhold taxes, the employee is required to make high payments to the IRS at the time of their tax return, which is often a significant hardship.
  4. Off-campus employers often mistakenly issue a Form-1099 to nonresident alien employees treated as independent contractors. This provides documentation to the IRS that the employer has not followed required procedures for nonresident alien employees. Such payments should be documented on the Form 1042-S showing appropriate withholding (up to 30%).