Taxes by Tax Residency
Federal Income Tax (FIT)
For Federal income tax purposes, Non-Immigrants are classified as resident aliens and non-resident aliens and are taxed at different graduated rates. Tax residency for federal tax purposes is determined by either the Substantial Presence Test or the Green Card Test. For information on determining your federal tax residency status, see Internal Revenue Service Publication 519, Chapter 1.
Tax treaties make it possible to reduce or eliminate federal tax withholding on payments to non-immigrants. Eligibility requirements include tax residence status, prior visits to the U.S., and type of payment. Information provided on the Foreign National Information Form at the time of hire will be analyzed by the Payroll Department. If it is determined the individual is eligible for the treaty benefit, it will be applied in the manner specified in the treaty. To see if your country of tax residence has a tax treaty with the U.S., refer to the IRS tax treaty table in IRS Publication 901.
Federal Insurance Contributions Act Tax (FICA)
Most workers in the United States pay social security and Medicare (FICA) taxes on wages received for services performed in the United States. The current combined rate is 7.65%. These taxes contribute to the United States’ social security system, which provides retirement and medical insurance benefits to certain individuals. In most cases, employers deduct these taxes from each paycheck.
There are two reasons for exemption from FICA withholding.
- Nonresident Status – Nonimmigrants in F-1 and J-1 status who are nonresidents for tax purposes are exempt from FICA until they become resident aliens (US tax residents) by passing either the Substantial Presence Test (SPT) or the Green Card Test. Upon advice from the Internal Revenue Service, the University of Pittsburgh begins withholding FICA from the first pay of the calendar year in which the individual is expected to become a resident alien.
- Student Credit Load – F-1 and J-1 Students are exempt from FICA as long as they are registered in courses with a combined credit load as shown in the following chart.
|Term||Undergraduate Credit Load||Graduate Credit Load|
|Part time||Full Time||Part time||Full Time|
|Graduate Students working on dissertations must be registered as graduate student and PeopleSoft must be coded as dissertation student for person to be FICA exempt.|
State Income Tax (SIT)
For Pennsylvania State tax purposes, individuals are classified as residents and non-residents. Tax withholding is the same for both residency statuses, as Pennsylvania does not have a non-resident tax withholding rate. For information on determining your Pennsylvania residency status, see the PA Department of Revenue Brochure REV-611.
Local Earned Income Tax (EIT)
For Local Income Tax purposes, individuals working on visas are considered non-residents. Non-residents are subject to the nonresident local income tax rate of the municipality in which they work. If they apply for United States Permanent Residency they will be classified as a resident of the municipality where they reside. This change of residency status changes their local income tax obligation to where they live and they become subject to the school tax of their local school district.
Jane is a Research Associate on a J-1 nonstudent visa who was hired on September 1st to work at the Pittsburgh Campus of the University of Pittsburgh. Jane lives in Mt. Lebanon but her local income tax obligation is to the City of Pittsburgh (where she works). On December 1st, Jane applies for U.S. Permanent Residency. Her local tax obligation moves to Mt. Lebanon where she begins paying the resident rate and Mt. Lebanon school tax.
Philip is a Computer Programmer on an H-1B visa who was also hired on September 1st to work at the Pittsburgh Campus. Philip lives in the City of Pittsburgh. On December 1st, Philip applies for U.S. Permanent Residency. His local tax obligation stays with the City, but he begins paying the resident rate and City of Pittsburgh school tax.
Local Services Tax (Occupational Tax)
Local Services Tax is withheld from each working individual in Pennsylvania, regardless of residency status. Local Services Tax is paid to the Municipality of the taxpayer’s primary employer. Exemptions from Local Services Tax for non-immigrants include working for multiple employers and annual income under $12,000. Download a copy of the exemption form.
Tax Treaty Benefits
Tax treaty analysis and the extension of tax treaty benefits is a service the University of Pittsburgh offers to eligible resident alien and non-resident alien payees. Tax treaties may reduce or eliminate a payee’s U.S. federal tax obligation for a period of time or up to an annual dollar limit. Tax treaties are not recognized by the state of Pennsylvania and are not applied to Pennsylvania state income tax.
If a treaty exists between the U.S. and the individual’s country of tax residence, and it contains an article for the type of income being paid, then the eligibility of the individual is determined. This determination is based on visa status, primary purpose and length of stay for both current and prior visits to the United States.
All resident aliens and non-resident aliens who receive payment through the University of Pittsburgh’s Payroll Department must complete a Foreign National Information Form. This includes fellowship and grant recipients with certificate job titles. The data provided will determine the individual’s tax residency status, tax withholding, and tax treaty eligibility. Approval of tax treaty benefits is based upon the data provided on the Foreign National Information Form and the guidance of the University of Pittsburgh’s external tax advisor.
Tax treaty benefits are extended only to foreign nationals that possess a valid US Social Security number.
- Receipts of application for a social security number are not sufficient due to the time required for the Social Security Administration to verify the individual’s employment authorization with US Customs and Immigration Services.
- Tax treaty benefits will begin after the social security number is given to the Payroll Office.
- The number can be mailed or uploaded through our secure site – https://apps.fis.pitt.edu/payroll/.
- No refunds will be granted by the Payroll Department for federal tax withheld prior to submission of the non-immigrant’s social security number.
- If you are eligible to receive a tax treaty benefit, notification will be sent to your Pitt email account. You will be given instructions for accessing and signing your treaty acceptance paperwork. A one month grace period is extended to all new treaty benefit recipients. To continue the treaty beyond that grace period, your signature is required.
- If you do not sign your documents by the required deadline, your treaty benefits will be suspended and federal tax will be withheld from your pay until you sign your treaty acceptance paperwork. Due to IRS regulations, Payroll is unable to issue refunds for tax withheld due to late signatures. Recipients who sign the required paperwork after federal tax has been withheld may be able to claim a refund on their personal tax return.
- Tax treaty eligibility is analyzed each December for the following tax (calendar) year. If you qualify for the treaty benefit, Payroll will notify you when your new acceptance paperwork is available for your signature. Contact your department by January 15th if you feel you are treaty eligible and have not been notified to sign your documents.
If you are not eligible to receive a tax treaty benefit, notification will be sent to your Pitt email account. The reason for denial will be given at this time along with notification of your tax residency status and instructions for completing your Form W-4.
If you have a tax treaty benefit and you see federal tax (FIT) withheld from your pay:
- Make sure you have signed your treaty papers by the deadline stated in your notification letter.
- Check the specifics of your treaty as stated on your treaty acceptance papers (IRS 8233). You may have exceeded your benefit limit. If you are a teacher or researcher, your treaty benefit will have a time limit. If you are a student, your treaty benefit will have a time limit and an annual dollar limit.
- If you recently extended the expected end date of your stay, your treaty benefit may have been stopped. Due to the benefit time limit, some treaties do not permit the benefit to continue after an extension has been processed.
Year End Information
Resident and nonresident aliens may receive Form W-2, Form 1042-S, or both depending on the type of income they have received, whether they have received a tax treaty benefit, and their tax residency status.
|Payment||Federal Tax Status||Resident Alien||Non-Resident Alien|
Not Treaty Exempt
|Individuals receiving postdoctoral scholarships, predoctoral fellowships and training grants||Treaty Exempt
Not Treaty Exempt
|No form issued
No form issued
Forms W-2 are mailed by January 31.
Forms 1042-S are mailed by March 15.
Please allow up to two weeks for delivery for all tax forms.
Requests for duplicates of current year tax forms are accepted and processed as early as two weeks after their scheduled mailing. Forms for prior years can be requested any time. Submit an inquiry to begin the process.
How can I determine my tax residency?
For Federal income tax purposes, non-immigrants are classified as resident aliens or non-resident aliens and are taxed at different graduated rates. Tax residency for federal tax purposes is determined by either the Substantial Presence Test or the Green Card Test. The Payroll Department uses the information you provide on your Foreign National Information Form to determine your tax residency for you.
For information on determining federal tax residency status, see Internal Revenue Service Publication 519, US Tax Guide for Aliens, Chapter 1. For information on determining your tax residency in Pennsylvania, see PA Department of Revenue REV-611.
How does my tax residency affect my tax withholding?
Tax residency status affects federal, state and local income tax withholding. It is also one of the factors used in determining whether FICA (social security and Medicare) will be withheld. Certain taxes are withheld regardless of tax residency status.
What are the criteria for receiving a tax treaty benefit?
When a treaty exits between the U.S. and the individual’s country of tax residence, it must contain an article for the type of income being paid. If these initial requirements are met, then specific information about the individual is considered. This includes tax residency status, prior U.S. visits (visa status, primary purpose and length of stay), and current visit details. Payroll tax treaty benefits are granted only to foreign nationals that possess a valid US Social Security number.
How do I apply for a tax treaty benefit?
The information provided on the Foreign National Information Form at the time of hire is used to determine tax treaty eligibility. Since the form is also used to determine tax residency status, it is required for everyone, not just those applying for a treaty benefit.
How will I know if I am eligible for a tax treaty benefit?
If you are eligible to receive a tax treaty benefit, notification will be sent to your Pitt email account. You will be given instructions for accessing and signing your treaty acceptance paperwork. A one month grace period is extended to all new treaty benefit recipients. To continue the treaty beyond that grace period, your signature is required.
Will I get the tax treaty benefit next year?
Tax treaty eligibility is determined each December for the following tax (calendar) year. If you qualify for the treaty benefit, Payroll will notify you that your new acceptance paperwork is available for your signature. Contact your department by January 15th if you believe you are treaty eligible and have not been notified to sign your documents.
I have a treaty benefit. So, why are taxes withheld from my pay?
The state of Pennsylvania does not recognize tax treaty benefits, which means that tax treaty benefits apply to federal income tax only. Depending on your tax residency status and job title, you may be subject to other tax withholding. These taxes include Social security and Medicare (FICA), state and local income, local services, school district and state unemployment. For more information, see Taxes by Tax Residency.
Does my visa class affect my taxation?
Current visa status, along with the details of any prior visits to the U.S. you may have had, is used in determining your tax residency status. Tax residency status is one of the major criteria for receipt of tax treaty benefits. It also determines where you pay local income tax and what the rate will be. Generally, nonresident aliens in F-1 and J-1 visa class are exempt from Social security and Medicare. F-1 and J-1 visa holders are also given a reduced tax withholding rate on their appointment-related scholarships and fellowships.
How do I update my visa classification with the Payroll Department?
Notify your department administrator any time your visa class changes or the expiration date of your current visa status is extended. You will be expected to provide a copy of your new documentation. In the event that your new authorization has not been received before your current authorization expires, you may be asked to provide a copy of your receipt of application for extension and a letter from OIS confirming timely application has been made.