Information for Off-Campus Employers
For tax purposes, nonresident aliens (NRAs) are generally taxed at much higher rates on income than are residents and citizens. Often, off-campus employers withhold taxes from payments made to nonresident aliens the same as U.S. citizens, which is a mistake for the following reasons:
- 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 NRA employee.
- FICA withholding is not required for NRAs 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.
- 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.
- Off-campus employers often mistakenly issue Forms 1099 to NRA 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%).
F-1 Student Employment Authorizations
- Off-campus due to economic necessity:
- Employment authorization is provided by the Department of Homeland Security (DHS) on an Employment Authorization Document (EAD), a small card containing the student's photograph and the dates of employment eligibility.
- 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).
- The EAD is valid for one year. The student may not be employed beyond the end date of the EAD, even if an application has been submitted for a renewal. The student must have an EAD in-hand to be eligible for employment.
- Students may work for any employer, and may change employers without notification to INS.
- 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 (OPT):
- May be either full-time or part-time employment in the student's field of study. The DHS issues authorization on an Employment Authorization Document (EAD).
- Students most often use OPT 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 OPT prior to completion of studies may be available.)
- Students may work for any employer under this authorization, and may change employers without notification to DHS as long as the work is directly related to the student's field of study.
- Curricular Practical Training (CPT):
- Allows the Designated School Official (DSO) to authorize full- or part-time employment for students to fulfill academic related jobs off-campus.
- Page 4 of 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. No INS EAD is issued for CPT employment.
- CPT is employer-specific. Students may not change employers unless they have received a new employment authorization notation from the DSO on page 4 of the I-20 ID Student Copy.
- For I-9 purposes, students with CPT 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
Students in J-1 status may be authorized for off-campus employment, but only by the Responsible Officer or Alternate Responsible Officer (RO or ARO) of organization that issued the Form DS-2019 (the immigration document the J-1 used to enter the U.S.). Work authorization must be on institutional letterhead and must spell out the terms of employment.
- Off-campus employment for economic necessity for students in J-1 status is not employer specific, but limits the student to no more than 20 hours/week of employment when school is in session and full-time during authorized school vacations.
- Academic training for a J-1 student is authorized by the RO or ARO and must list the name and location of the employer in the authorization letter. Academic training work permission is job-specific, and must be consistent with the terms and conditions of the work authorization letter.
- INS will not issue a student in J-1 status an EAD under any circumstances.
- Persons in J-2 status are dependents of persons in J-1 status. Employment authorization may be issued by DHS and is not job-specific. The DHS EAD will likely be used for completion of the Form I-9. Persons in J-2 status are not generally eligible for exemption from FICA withholding.
Nonresident Alien Taxation Office
University of Missouri-Columbia
1095 Virginia Ave.
Columbia, MO 65211-1020
Director, Int'l Student and Scholar Services
Assistant Director, International Center
N52 Memorial Union
University of Missouri-Columbia
Columbia, MO 65211