ALIEN MANUAL - TAX RULES AND REGULATIONS, SECTION D1

The Federal agency responsible for the implementation of tax withholding regulations is the Internal Revenue Service (IRS). In California, the state agency counterpart is the Employment Development Department (EDD). The franchise Tax Board (FTB) is the state agency responsible for implementation of nonresident tax withholding from non-employees.

IRS Section 1441 requires Payroll Services as a withholding agent for the University to withhold federal tax on payments to nonresident aliens. IRS Section 1461 holds the University ultimately responsible for the accurate and timely tax withholding of nonresidents. Should there be errors, the University is liable for the tax payment, including any penalties which the IRS may levy. Strict adherence to IRS requirements in tax coding of foreign individuals is of primary importance for the Payroll System to withhold taxes accurately.

The IRS requires the University to withhold 30% of all payments made to nonresident aliens. There are exceptions to the standard 30% rate. Exceptions to this rule depend on the type of income paid, which is discussed in Section C: U.S. Income.

The state of California requires the University to withhold 7% of all payments $1,500.00 and over made to nonresidents (non-employees). Payments made to employees are subject to withholdings in accordance with the graduated California Withholding Tax Table and the University of California Employee Federal and State Withholding Allowance certificate (W-4).

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