Payroll, Taxes & Social Security
Paying Your International Staff Members
International students must pay taxes and obtain a Social Security Number. It’s very important that you understand what you need to do regarding withholding, earnings statements, and wage reporting.
Much of what you need to do is business-as-usual for you, but there are a few differences you’ll need to keep in mind.
Social Security Numbers
Every student must obtain a Social Security Number (SSN) by visiting the local Social Security office with paperwork in hand. You can help them find the local office, and offer transportation if needed.
It takes several weeks for SSNs to be issued but it is legal for students to work and be paid, before they receive an SSN, as long as they have applied for a number.
For more information, read the legal opinion letter written by CIEE attorneys.
Payroll & Taxes
Every CIEE Work & Travel USA student must pay federal, state and local income tax. Students do not pay Social Security tax, Medicare, or federal unemployment tax.
Many students can benefit from assistance filing tax returns. CIEE recommends taxback.com, a tax preparation service that serves many J-1 exchange visitors.
One of the first things your student will need to do is fill out a W-4, just like any new hire. However, the instructions are a bit different. Here’s how to guide them:
Do not use the Personal Allowances Worksheet at the top of the W-4. This is for U.S. residents only.
Check only “Single” marital status on line 3, regardless of actual marital status.
Claim only one withholding allowance (enter “1” on line 5).
Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4.
J-1 Visitors cannot claim “Exempt” withholding status on line 7.
You will need to send a W-2 statement to your student at the end of the tax year. If the job spans two tax years, you will need to send a second W-2 many months after the student has returned home.
Confirm your student’s home address and email address before he or she leaves. Contact CIEE for assistance if you need to verify the address – we have it on file.
If you use an online system to distribute W-2s, confirm that the student has login information.
There are special procedures for students. You must add a certain amount to their wages before calculating the correct withholding amount of federal tax only. The calculated tax is then withheld from their original pay.
How much to add depends on your payroll frequency. The amount may have changed, so check Publication 15, Circular E for the latest information:
Weekly: Add $42.30
Bi-weekly: Add $84.60
Semi-monthly: Add $91.70
Monthly: Add $183.30
A student makes $500 and is paid weekly.
Add $42.30 and use the tax table to figure withholding on $542.30. For example, $56.
Gross pay: $500. Federal withholding: $56. Net pay: $444
This applies to the wage-bracket method of withholding. If you use the percentage method, consult the IRS or a tax professional.
Avoid Common Mistakes
If you have been withholding FICA/FUTA from your student’s pay, you will need to change withholdings for future paychecks and issue a refund. You can claim a refund of incorrectly paid FICA/FUTA from the IRS when filing your employer’s federal tax return (see the instructions for IRS forms 941 and/or 944 for more information).