Publication 519 |
2000 Tax Year |
Withholding From Other Income
Other income subject to 30% withholding generally includes fixed or
determinable income such as interest (other than portfolio interest),
dividends, pensions and annuities, and gains from certain sales and
exchanges, discussed in chapter 4.
It also includes 85% of social
security benefits paid to nonresident aliens.
Income (other than compensation) that is effectively connected with
your U.S. trade or business is not subject to withholding at the 30%
(or lower treaty) rate. You must file Form W-8ECI with the payer
of the income.
Form 4224 (used in prior years) is no longer valid. See
Important Changes in the front of this publication.
Special rules for withholding on partnership income, scholarships,
and fellowships are explained next.
Tax Withheld on
Partnership Income
If you are a foreign partner in a U.S. or foreign partnership, the
partnership will withhold tax on your share of effectively connected
taxable income from the partnership. The partnership will give you a
statement on Form 8805, Foreign Partner's Information Statement
of Section 1446 Withholding Tax, showing the tax withheld. A
partnership that is publicly traded may withhold on your actual
distributions of effectively connected income. In this case the
partnership will give you a statement on Form 1042-S,
Foreign Person's U.S. Source Income Subject to Withholding.
In either case, the withholding rate is 39.6%. Claim the tax
withheld as a credit on line 62b of Form 1040NR.
If you are a foreign partner responsible for withholding, see
Partnership Withholding on Effectively Connected Income in
Publication 515.
Reduced Withholding
on Scholarships
and Fellowship Grants
There is no withholding on a qualified scholarship
received by a candidate for a degree. See chapter 3.
If you are a nonresident alien student or grantee with an
"F,""J,""M," or "Q" visa and you receive a U.S.
source grant or scholarship that is not fully exempt, the withholding
agent (usually the payer of the scholarship) withholds tax at 14% (or
lower treaty rate) of the taxable part of the grant or scholarship.
However, if you are not a candidate for a degree and the grant does
not meet certain requirements, tax will be withheld at the 30% (or
lower treaty) rate.
You may be entitled to reduce withholding on the taxable part of
your grant or scholarship if the withholding agent chooses to withhold
under an alternative withholding procedure. (This alternative
withholding procedure is not mandatory, and the withholding agent does
not have to use it.) Your withholding agent chooses this alternative
procedure by asking you to fill out Form W-4 and the
Personal Allowances Worksheet (attached to Form W-4).
Use the following instructions instead of the Form W-4
instructions to complete the worksheet.
Line A.
Enter the total of the following amounts on line A.
Personal exemption.
Include the prorated part of your allowable personal exemption.
Figure the amount by multiplying the number of days you expect to be
in the United States in 2001 by the daily exemption amount ($7.95).
Expenses.
Include expenses that will be deductible on your return. These
include away-from-home expenses (meals, lodging, and transportation),
certain state and local income taxes, charitable contributions, and
casualty losses, discussed earlier under Itemized Deductions
in chapter 5.
They also include business expenses, moving
expenses, and the IRA deduction discussed under Deductions
in chapter 5.
The amount of away-from-home expenses should be the anticipated
actual amount, if known. If you do not know the amount of actual
expenses at the time you complete Form W-4, you can claim the
current per diem allowance for participants in the Career Education
Program under the Federal Travel Regulations. The current per diem
allowance is $18 per day.
Nontaxable grant or scholarship.
Include the part of your grant or scholarship that is not taxable
under U.S. law or under a tax treaty.
Line B.
Enter -0- unless the following paragraph applies to
you.
If you are a student who qualifies under Article 21(2) of the
United States-India income tax treaty, and you are not claiming
deductions for away-from-home expenses or other itemized deductions
(discussed earlier), enter the standard deduction on line B. The
standard deduction amount for 2001 is $4,550 if you are single or
$3,800 if you are married.
Lines C and D.
Enter -0- on both lines unless the following paragraphs
apply to you.
If you are a resident of Canada, Mexico, Japan, South Korea, or a
U.S. national, an additional daily exemption amount may be allowed for
your spouse and each of your dependents.
If you are a resident of India who is eligible for the benefits of
Article 21(2) of the United States-India income tax treaty, you
can claim an additional daily exemption amount for your spouse. You
can also claim an additional amount for each of your dependents
not admitted to the United States on "F-2,"
"J-2," or "M-2" visas if they meet the same
rules that apply to U.S. citizens.
Enter any additional amount for your spouse on line C. Enter any
additional amount for your dependents on line D.
Lines E, F, and G.
No entries should be made on lines E, F, and G.
Line H.
Add the amounts on lines A through D and enter the total on line H.
Form W-4.
Complete lines 1 through 4 of Form W-4. Sign and date the
form and give it with the Personal Allowances Worksheet to
your withholding agent.
If you file a Form W-4 to reduce or eliminate the withholding
on your scholarship or grant, you must file an annual U.S. income tax
return to be allowed the exemptions and deductions you claimed on that
form. If you are in the United States during more than one tax year,
you must attach a statement to your yearly Form W-4 indicating
that you have filed a U.S. income tax return for the previous year. If
you have not been in the United States long enough to be required to
file a return, you must attach a statement to your Form W-4
saying you will file a U.S. income tax return when required.
After the withholding agent has accepted your Form W-4, tax
will be withheld on your scholarship or grant at the graduated rates
that apply to wages. The gross amount of the income is reduced by the
amount on line H of the worksheet and the withholding tax is figured
on the remainder.
You will receive a Form 1042-S from the withholding agent
(usually the payer of your grant) showing the gross amount of your
scholarship or fellowship grant less the withholding allowance amount,
the tax rate, and the amount of tax withheld. Use this form to file
your annual U.S. income tax return.
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