What Is IRS Form 8223 and How Do I File It?
Understand the process for non-resident aliens to apply tax treaty provisions and exempt personal service income from U.S. federal tax withholding.
IRS Form 8233, “Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual,” is used by non-U.S. citizens to claim an exemption from federal income tax withholding. Under Internal Revenue Code section 1441, payers are required to withhold a 30% tax on income paid to foreign persons for personal services performed in the U.S. This form allows eligible individuals, such as students, teachers, and researchers who are residents of countries with a U.S. tax treaty, to apply for an exemption. By submitting this form to their payer, or withholding agent, they can assert their eligibility under a specific tax treaty to reduce or eliminate the withholding.
Determining Eligibility for Tax Treaty Benefits
To use Form 8233, an individual must be a nonresident alien for U.S. tax purposes. A person is considered a nonresident alien if they are not a U.S. citizen and do not meet either the green card test or the substantial presence test for the calendar year. These tests determine an individual’s residency status based on their immigration status and the number of days they are physically present in the United States.
The individual must also be a resident of a country that has an active income tax treaty with the U.S. Not all treaties contain provisions that exempt personal service income from taxation. You must confirm that the specific treaty between the U.S. and your home country includes an article that applies to your situation, such as provisions for students or teachers. IRS Publication 901, “U.S. Tax Treaties,” provides details on each agreement.
The income must be for personal services, as either an employee (dependent) or a contractor (independent). Some treaties offer exemptions for income earned while teaching or conducting research for a limited time, while others provide benefits for students on income related to their training. The specific tax treaty article defines the limits and conditions, such as maximum income amounts or a limited time frame for the exemption.
Information and Documentation Needed to Complete Form 8233
To complete Form 8233, you must provide your full name, permanent foreign address, and U.S. address. A U.S. taxpayer identification number (TIN) is mandatory. This is either a Social Security Number (SSN) or, for those ineligible for an SSN, an Individual Taxpayer Identification Number (ITIN). An ITIN is obtained by filing Form W-7.
The form requires an explanation for the exemption claim. This includes identifying the specific tax treaty and the article under which the exemption is claimed. You must also provide your passport and visa information, describe the personal services being performed, and state the total compensation you expect to receive during the tax year.
An additional statement must be attached to Form 8233 for certain filers. Nonresident alien students, teachers, and researchers claiming a treaty exemption must provide a specific, formatted statement. The required content for these statements is outlined in IRS Publication 519, “U.S. Tax Guide for Aliens.” For example, a student’s statement might need to affirm they are in the country solely for education or training and include details about their academic institution.
Submitting the Form to the Withholding Agent
The completed Form 8233 and any required attachments are not sent to the IRS by the individual. Instead, the form must be submitted directly to the withholding agent, which is the person or entity paying for the services, such as an employer or university. The form should be provided at the start of the service period or the beginning of each new tax year, as it is valid for only one tax year.
The withholding agent must review the form to ensure it is complete and that the claimed exemption appears valid. If satisfied, the agent completes and signs the certification on the form. The agent is then required to forward a copy of the signed Form 8233 to the IRS within five days of acceptance.
After the agent sends the form to the IRS, they can stop withholding federal income tax from payments made at least 10 days after the form is mailed. The withholding agent must retain a copy of the form for their records. If the IRS reviews the submission and finds the claim invalid, it will notify the agent to begin withholding immediately.