Managing payroll for resident and non-resident aliens is confusing. These employees hold different visas and are taxed differently— and you need to be an expert at both. If your company hires anyone on a visa status, a corporate tax policy is critical for your international assignments.
HR and payroll must join forces to process and accurately manage payroll taxation for anyone being hired with a visa status, asserts payroll expert Dayna Reum. In her audio conference for AudioSolutionz, “Comply With Resident & Non-Resident Alien Payroll Requirements,” Reum explains the visa process, including how companies can obtain a visa for a potential employee and how to handle employees already on visas when they are hired.
8 Types of U.S. Work Visas
A non-U.S. citizen needs a visa to work in the U.S. There are many different types of U.S. work visas with different eligibility and requirements. Before you can effectively manage payroll for your alien employees, familiarize yourself with the different visas available.
According to workpermit.com, “The visas most likely to be used by employers are non-immigrant work visas such at the L-1 visa, E-2 visa or H-1B visa.”
Hibase.com offers a guide comparing the main types of U.S. work visas:
- H1B Visa: The primary U.S. work visa for professionals and students from all over the world or in the U.S. who work in specialty occupations; valid for up to 6 years; dual intent visa (frequently eligible to apply for a Green Card)
- H2B Visa: Temporary visa for short-term seasonal work such as in the hospitality and tourism industries
- Green Card: Permanent residency visa; unlimited duration; can lead to U.S. citizenship
- E3 Visa: Similar to the H1B visa but available to Australian citizens only
- TN1 Visa: Similar to the H1B visa but available to Canadian and Mexican citizens only
- L1 Visa: For senior employees who work for a company outside the U.S. and want to transfer to the same company’s U.S.-based office
- E2 Investors Visa: For people who want to buy/invest/start a business in the U.S.
- J1 Work Training Visa: Short term training/learning visa to for furthering skills in the U.S. and then returning home to apply them
Beware H1B Visa Challenges
Even though the H1B is the most common U.S. work visa, it comes with some challenges. Trinet.com noted that relying on the H1B program presents difficulty for employers in today’s political climate, which is less welcoming to foreign workers than it has been in the past; additionally:
- The “Buy American, Hire American” executive order signed by President Trump on April 18, 2017 forecasted sweeping changes in the way foreign workers are issued visas.
- There is suggestion that a more deliberate assessment of applicants will replace the lottery system currently in use, and the fear is that this extra assessment will encourage discrimination based on country of origin.
- H-1B visa applicants are facing increasing challenges in the form of requests for evidence (RFEs).
- Proposed changes would restructure the Optional Practical Training program (OPT), which currently allows foreign students to work in the US for up to three years after graduating from a U.S. college or university. This would result in fewer graduates being sponsored for work visas.
Know the Alien Payroll Tax Code
The Internal Revenue Service (IRS) states that any employer who hires aliens (non-U.S. citizens or residents) to perform services within the United States must follow general procedures for reporting and withholding federal income taxes, including:
- Identify all aliens on the company’s payroll.
- Divide the aliens into two groups: resident aliens and nonresident aliens
- Treat resident aliens the same as U.S. citizens for income tax withholding purposes.
- Treat nonresident aliens according to special withholding rules that apply to nonresident aliens for income tax withholding purposes.
There are many IRS taxation rules you must know to be compliant with your non-resident aliens. Reum provides an overview of international visas and explains how tax treaties and tantalization agreements affect your payroll process. Her expertise will prepare you to handle payroll taxation for your employees’ home and work countries.