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March 1—Updated guidance on withholding for foreign nationals has been released in the 2016 version of the U.S. Internal Revenue Service's (IRS) Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
The latest version of the publication no longer includes tax treaty tables covering foreign workers, which are now available on IRS.gov.
The U.S. also increased penalty amounts for failures to file information returns and furnish payee statements, according to the publication.
Foreign persons usually are subject to U.S. tax on U.S. source income. A reduced rate may apply if there is a tax treaty between the foreign person's country of residence and the United States. The tax is generally withheld from the payment made to the foreign person. Many types of U.S. nonwage source income received by a foreign person are subject to U.S. tax of 30 percent. Wage income may be taxed at graduated rates.
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The 2016 version of Publication 515 is available at https://www.irs.gov/pub/irs-pdf/p515.pdf.
The latest tax treaty tables for foreign workers is available at https://www.irs.gov/Individuals/International-Taxpayers/Tax-Treaty-Tables.
More information on payroll issues in the United States can be found in the United States country primer.
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