Instructions For Form 8233 (Page 2 of 4) in pdf

personal services include compensatory

Example. XYZ University awards a

fellowship income of a nonresident alien

scholarship or fellowship income (see

scholarship to N, a nonresident alien

temporarily present in the United States

definition later). Compensation for such

student. The only condition of the

under an “F,” “J,” “M,” or “Q” visa as if it

services includes wages, salaries, fees,

scholarship is that N attends classes and

were compensatory scholarship or

bonuses, commissions, and similar

maintains a minimum level of academic

fellowship income (provided the

designations for amounts paid to an

performance. The scholarship income is

nonresident alien is not claiming treaty

employee.

not compensatory because N is not

benefits with respect to that income). The

required to perform services as an

withholding agent makes this election by

Required Withholding Form(s)

employee as a condition for receiving the

requesting that the nonresident alien

Complete Form 8233 for compensation

scholarship.

complete Form W-4 using the instructions

you receive for dependent personal

in Rev. Proc. 88-24, 1988-1 C.B. 800.

Required Withholding Form(s)

services only if you are claiming a tax

Compensatory scholarship or fellowship

Withholding Agent

treaty withholding exemption for part or all

income is considered to be dependent

of that income. Do not use Form 8233 to

Any person, U.S. or foreign, that has

personal services income. Therefore,

claim the daily personal exemption

control, receipt, or custody of an amount

complete Form 8233 for this income only

amount. For compensation for which you

subject to withholding or who can

if you are claiming a tax treaty withholding

are not claiming a tax treaty withholding

disburse or make payments of an amount

exemption for part or all of that income.

exemption, use Form W-4, Employee’s

subject to withholding is a withholding

Do not complete Form 8233 to claim the

Withholding Allowance Certificate.

agent. The withholding agent may be an

daily personal exemption amount.

individual, corporation, partnership, trust,

Completing Form W-4. You should

For any part of this compensatory

association, or any other entity, including

complete Form W-4 as follows:

income for which you are not claiming a

(but not limited to) any foreign

Line 2. You are required to enter a

tax treaty withholding exemption, use

intermediary, foreign partnership, and

social security number (SSN) on line 2 of

Form W-4. See Completing Form W-4

U.S. branches of certain foreign banks

Form W-4. If you do not have an SSN,

earlier.

and insurance companies. Generally, the

you must apply for one on Form SS-5,

person who pays (or causes to be paid)

Noncompensatory Scholarship

Application for a Social Security Card.

the amount subject to withholding to the

or Fellowship Income

You may get Form SS-5 from a Social

nonresident alien individual (or to his or

Security Administration (SSA) Office. Fill

her agent) must withhold.

Noncompensatory scholarship or

in Form SS-5 and return it to the SSA.

fellowship income is scholarship or

Beneficial Owner

fellowship income that is not

You cannot enter an individual

compensatory scholarship or fellowship

For payments other than those for which

taxpayer identification number

income (defined earlier).

a reduced rate of withholding is claimed

(ITIN) on line 2 of Form W-4.

CAUTION

under an income tax treaty, the beneficial

The taxable portion of

Line 3. Check the single box

owner of income is generally the person

noncompensatory scholarship or

who is required under U.S. tax principles

regardless of your actual marital status.

fellowship income (defined below) paid to

to include the income in gross income on

a nonresident alien is generally subject to

Line 5. You should generally claim

a tax return. A person is not a beneficial

withholding at a rate of 30% (the rate is

one withholding allowance. However, if

owner of income, however, to the extent

generally 14% in the case of a

you are a resident of Canada, Mexico, or

that person is receiving the income as a

nonresident alien temporarily present in

the Republic of (South) Korea; a student

nominee, agent, or custodian, or to the

the United States under an “F,” “J,” “M,”

from India; or a U.S. national; you may be

extent the person is a conduit whose

or “Q” visa).

able to claim additional withholding

participation in a transaction is

allowances for your spouse and children.

Taxable portion of noncompensatory

disregarded. In the case of amounts paid

See Pub. 519 for more information.

scholarship or fellowship income. If

that do not constitute income, beneficial

you were a degree candidate, the amount

If you are completing Form W-4 for

ownership is determined as if the

of this type of income that you used for

more than one withholding agent (for

payment were income.

expenses other than tuition and

example, you have more than one

course-related expenses (fees, books,

employer), figure the total number of

Avoid Common Errors

supplies, and equipment) is generally

allowances you are entitled to claim (see

taxable. For example, amounts used for

the previous paragraph) and claim no

To ensure that your Form 8233 is

room, board, and travel are generally

more than that amount on all Forms W-4

promptly accepted, be sure that you:

taxable. If you were not a degree

•

combined. Your withholding usually will

Answer all applicable questions

candidate, the full amount of the

be most accurate when all allowances are

completely.

scholarship or fellowship income is

•

claimed on the Form W-4 for the

Specify the tax year for which this form

generally taxable.

highest-paying job and zero allowances

will be effective in the space provided

are claimed on the others.

Required Withholding Form

above Part I of the form.

•

You should generally complete Form

Line 6. Write “nonresident alien” or

Enter your complete name, addresses,

W-8BEN, Certificate of Foreign Status of

“NRA” above the dotted line on line 6. If

and identifying number(s) in Part I.

Beneficial Owner for United States Tax

you would like to have an additional

•

Have attached the required statement

Withholding, to claim a tax treaty

amount withheld, enter the amount on line

described in the line 10 instructions if you

withholding exemption for this type of

are a foreign student, trainee, professor/

income. No Form W-8BEN is required

Line 7. Do not claim that you are

teacher, or researcher.

unless a treaty benefit is being claimed.

•

exempt from withholding on line 7 of Form

Are not trying to claim tax treaty

Exception. If you are receiving both

W-4 (even if you meet both of the

benefits for a country with which the

compensation for personal services

conditions listed on that line).

United States does not have a ratified tax

(including compensatory scholarship or

treaty.

Compensatory Scholarship or

fellowship income) and noncompensatory

•

Are not trying to claim tax treaty

Fellowship Income

scholarship or fellowship income from the

benefits that do not exist in your treaty.

same withholding agent, you may use

In general, scholarship or fellowship

•

Complete lines 11 through 14 in

one Form 8233 for both types of income.

income is compensatory to the extent it

sufficient detail to allow the IRS to

However, this exception applies only if

represents payment for past, present, or

determine the tax treaty benefit you are

you are claiming a tax treaty withholding

future services (for example, teaching,

claiming.

exemption for both types of income.

research, etc.) performed by a

•

Claim the proper number of personal

nonresident alien as an employee and the

Alternate withholding election. A

exemptions on line 15.

performance of those services is a

withholding agent may elect to withhold

•

Complete the required certification in

condition for receiving the scholarship or

on the taxable portion of

fellowship (or tuition reduction).

noncompensatory scholarship or

Part III.

-2-

Instructions For Form 8233 Page 2

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