Keep the nonresident withholding adjustment out of employee wages

Publication 15-T describes a special federal withholding calculation for certain nonresident alien employees performing services in the United States. Confirm that the employee falls within the procedure before enabling it. A foreign passport, foreign address or visa label alone should not be used as the company's complete tax-residency determination.

Give the employee Notice 1392 for the special Form W-4 instructions and route residency or treaty questions to the qualified adviser. Preserve the reviewed status, applicable dates and the employee's valid withholding certificate. Payroll needs a supportable instruction, not a guess based on nationality.

The procedure applies to wages subject to income-tax withholding and has stated exceptions, including the identified Indian student and business-apprentice cases. Have the adviser identify any exception for the actual employee. An exemption from this calculation does not necessarily establish an exemption from other payroll obligations.

The publication directs employers to add an amount to wages solely for calculating federal income tax withholding. The applicable table depends on the Form W-4 version and payroll period, with additional instructions for older certificates. Verify the software's tax-year table and the period selected rather than entering a remembered annual amount.

Ask the provider to show the actual wages, computational addition and resulting withholding worksheet amount in a payroll preview. Keep the addition distinguishable from earnings. The employee has not received extra compensation merely because the withholding calculation temporarily uses a larger number.

Check weekly, biweekly and semimonthly settings carefully. A payroll frequency change can select a different table amount even when the employee's annual salary is unchanged. Retain the provider's calculation detail or an equivalent explanation so the company can verify which settings produced the withholding.

Publication 15-T expressly states that the computational amounts should not appear in any box of Form W-2 and do not increase the employee's income-tax liability. They also do not increase Social Security, Medicare or FUTA liability. Verify those outputs after the payroll preview, especially where the provider uses a custom earning code.

For a hypothetical payroll with $2,000 of actual wages and a $300 illustrative computational addition, the withholding worksheet would use $2,300 for this simplified check. Actual gross wages remain $2,000. The $300 is deliberately hypothetical and is not a current table amount or a recommendation for any payroll period.

Confirm that net pay reflects the computed withholding, without paying or deducting the computational addition itself as cash. Inspect year-to-date gross wages and the accounting export as well as the payslip. A provider display can look correct while a custom mapping incorrectly sends the adjustment into wage expense.

The publication specifies that the procedure does not apply to supplemental wages when the stated mandatory or optional flat-rate withholding methods are used. Ask payroll to apply the relevant rule for bonuses and other supplemental payments. Do not mechanically add the regular-period amount to every off-cycle payment.

When the employee supplies a new W-4 or the adviser changes the reviewed residency treatment, record the effective date and preview the next payroll. Investigate any prior incorrect wage inclusion separately. Correcting a calculation setting does not automatically repair an already filed W-2 or employment-tax return.

Retain the status determination, certificate, provider settings and output check with restricted payroll records. At the annual tax-table update, confirm the procedure still uses the correct year's instructions. The completed review should establish that the adjustment affects withholding computation while leaving the employee's actual compensation accurately reported.