What is a non-resident alien?

What is a non-resident alien?

In the US, a non-resident alien is a person who is neither a US citizen nor a US national and who does not qualify as a US tax resident. This covers individuals who fail the green card test or who do not satisfy the IRS’s substantial presence test.

Non-resident aliens typically remain in the US on temporary non‑immigrant visas, such as J‑1 or F‑1. This category generally includes foreign students, participants in academic programmes and non-resident contractors. They are subject to a separate tax classification and normally do not make FICA contributions for Medicare and social security.

Work in the US is permitted only after authorisation. Non-resident aliens apply for this by completing the  I-9 Employee Eligibility Verification form.

Employers and individuals must understand non-resident aliens’ rights, status and tax responsibilities to comply with US law. Failure to comply can result in financial penalties, incorrect tax filings and legal complications.

Non-resident alien taxation

Taxation is often the most confusing aspect of non-resident alien status. The IRS treats non-resident aliens under a distinct tax classification, with rules that differ from those applying to residents.

Generally, non-resident aliens are taxed on US‑source income using either resident rates or flat rates depending on the activity. For example, non-resident independent contractors typically face a flat 30% withholding on US income. They commonly have limited access to deductions and credits and are ineligible for certain tax benefits, such as the Earned Income Tax Credit (EITC) and the American Opportunity Tax Credit (AOTC).

A non-resident alien married to a resident alien may file jointly. The resident spouse can elect to be treated as a resident for tax purposes for the year; in that situation the couple should file using Form 1040 with the status Married Filing Jointly. On leaving the US, they should submit Form 1040-C.

Non-resident aliens must file a US tax return if they conducted a trade or business in the US during the prior year, or if they received US income on which tax was not withheld. Those seeking a refund or wishing to claim deductions must also file an income tax return.

As noted, non-resident aliens are generally exempt from social security and Medicare taxes, although they may remain liable for other federal or state taxes.

Hiring non-resident aliens

A US employer must comply with applicable immigration laws to engage a non-resident alien. This includes verifying the individual’s right to work and observing visa conditions. Employers are also responsible for tax withholding and for meeting reporting obligations to government agencies.

Required documentation includes:

• Authorisation to work in the US — Form I-9
• A Certificate of Naturalization
• A valid, unexpired Temporary Resident Card
• A social security number (SSN)
• A driving licence or a state- or federal-issued ID card
• An original birth certificate

Compliance can be complex, particularly regarding the tax consequences of hiring non-resident aliens. Employers should apply relevant tax treaties where applicable. When hiring Remote employees overseas, companies should take care not to create a permanent establishment that would require opening an entity abroad. Using employer of record services can help mitigate that risk.

Despite the challenges, hiring non-resident aliens brings advantages such as access to a wider talent pool and diverse skill sets. Offering  can also help attract top talent.