COMPTROLLER'S SEAL STATE OF CONNECTICUT
STATE OF CONNECTICUT
NANCY WYMAN
COMPTROLLER
OFFICE OF THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
MARK OJAKIAN
DEPUTY COMPTROLLER

MEMORANDUM NO. 95 - 58

TO THE HEADS OF ALL STATE AGENCIES

October 6, 1995

Attention: Chief Fiscal Officers, Business Managers and Payroll and Personnel Officers
Subject: Non-Resident Alien Employees and Independent Contractors
  1. PURPOSE

    The purpose of this memorandum is to standardize and clarify procedures when hiring a non-resident alien.

  2. AUTHORITY

    Internal Revenue Service (IRS) Publication 515 entitled, "Withholding of Tax on Non-Resident Aliens and Foreign Corporations" outlines the Internal Revenue Code guidelines pertaining to these individuals.

    A non-resident alien is an individual who is not a U.S. citizen or resident.

    The IRS allows an exemption to individuals who are non- resident aliens if certain criteria are met. The criteria that must be met for exemption are:

    - Students, teachers and trainees can be exempted from tax and from residency requirements if they complete and file annually Form 8233, Exemption from Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual. It is the employee's obligation to file this form.

    - Unless a specific tax treaty supersedes the general language of the Code, however, a teacher, researcher or trainee's exemptions is valid only for two years out of any six-year period. Students are exempt for five years.

    - The nonresident alien individual must also provide the employer with a statement that he or she is exempt and complete a Form W-4, also to be submitted with the individuals annual income tax return.

  3. HIRING PROCEDURES - INDIVIDUALS ON PAYROLL

    Each agency must make its own determination as to which procedure it will follow. Procedures as follows:

    Exemption Claim Made

    1. The state will not withhold applicable taxes when conditions 1 through 4 (as outlined below) are met. However, a W-2 form will be issued at the end of the calendar year showing wages with no federal taxes deducted.

      1. Information must be requested about the applicant's tenure in the United States, the number of years that the applicant has already filed returns as an exempt non-resident alien, and the nature of prior research or work.

      2. A Form 8233, Exemption from Withholding on Compensation for Independent Personal Services of a Non-Resident Alien Individual, must be requested and the back-up information listed above obtained.

      3. If you know or have reason to know that any of the facts or assertions may be false or that the eligibility of the individual's compensation for the exemption cannot be readily determined, you may not accept Form 8233 and must withhold.

      4. All documentation must be on file at the agency for audit purposes. Do not submit any documentation to the Comptroller's Payroll Services Division.

      Exemption Claim Not Made/Allowed

    2. If the agency makes the determination not to request the appropriate forms and information from the individual, then all applicable taxes must be withheld. A W-2 form will be presented at the end of the calendar year indicating all taxes withheld. If after the issuance of a W-2, the individual presents the information as indicated in Section III - 1 above, the individual must then file for a refund from the IRS, not from the agency.

  4. HIRING PROCEDURES - PERSONAL SERVICE AGREEMENTS (802-A)

    When an agency hires an independent contractor*, a determination must be made as to whether or not the payments to the vendor will be reportable. If the individual presents the same information as outlined in Section III - A, the payment will be non-reportable. The agency must then indicate on the CO-17, Vendors Invoice, that the individual is exempt and non-reportable. A 1099-MISC statement will not be issued to the individual at the end of the calendar year.

    All documentation must be on file at the agency for audit purposes. It is recommended that a copy of the Form 8233 be attached to the contract. Do not submit any documentation to the Comptroller's Accounts Payable Division.

    However, if an agency makes the determination that the above information will not be requested at the time of hire, the income will be considered reportable. A 1099-MISC statement will be issued to the individual at the end of the calendar year for payments made of $600 or more.

    *Refer to Comptroller's Memorandum No. 94-9 dated April 8, 1994 entitled "Determining a Worker's Status".

  5. MISCELLANEOUS

    Each agency should obtain a copy of the IRS Publication 515 entitled, "Withholding of Tax on Non-Resident Aliens and Foreign Corporations". This publication can be obtained by calling the IRS Forms and Publication Assistance Section at 1-800-829-3676.

  6. QUESTIONS

    Questions regarding the above procedures may be directed as follows:

Payroll Procedures: Comptroller's Payroll Services
Division, 566-5428;
Payment Procedures: Comptroller's Accounts Payable
Division, 566-8978 or 566-3895;
Internal Revenue Service: International Division,
Bridgeport, Connecticut;
Mr. Stan Locke, 203-579-5756;
Memorandum Interpretation: Policy Evaluation and Review
Division, 566-5337.

NANCY WYMAN
STATE COMPTROLLER

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