Form 8233

What Is Form 8233?

Form 8233 is an IRS-issued form filed by a non-resident alien (NRA) employee. By filing Form 8233, they are looking to claim an exemption from Federal Income Tax Withholding (FITW) based on a tax treaty. 

How Does a Tax Treaty Work? 

The U.S. has tax treaties with multiple countries. Under these treaties, residents of foreign countries who receive compensation for both independent and dependent personal services in the States are either taxed at a reduced rate or exempt from certain taxes on their income. These reduced rates and exemptions vary across countries and items of income. 

The same goes for U.S. residents or citizens under these treaties—if they work in a foreign country, U.S. residents/citizens are eligible for a tax reduction or an exemption from certain foreign taxes on their income. 

What Do Employers Need to Know about Form 8233? 

If you’ve hired an NRA who would like to claim a tax treaty exemption, they must fill out Form 8233. NRA employees must provide a Taxpayer Identification Number (TIN) on the form, which in most cases, is a Social Security number (SSN).

If your employee does not have or is not eligible for an SSN, they must apply for an Individual Taxpayer Identification Number (ITIN). To do this, they must file Form W-7 and provide proof they are not eligible for an SSN (this proof can be a rejected Form SS-5). 

It can take several weeks for the IRS to notify your employee of their ITIN status. In the meantime, they may attach a copy of their submitted W-7 and rejected Form SS-5 to Form 8233 and submit it to you. 

Form 8233 Submission to the IRS

Employers must review Form 8233 and provide their information and signature in Part IV—Withholding Agent Acceptance and Certification. The form must be mailed or faxed to the IRS within five days after it is approved and signed. Be sure to provide a copy of Form 8233 to your NRA employee and keep a copy for yourself. 

If the IRS rejects your employee’s Form 8233, you must immediately begin withholding the applicable taxes from their paychecks. 

What Are the Key Terms to Know for Form 8233? 

Understanding the contents of Form 8233 requires familiarizing yourself with its key terms. Here are a few to help you get started: 

• Non-resident alien (NRA): Someone who is not a U.S. citizen and does not meet the green card test nor the substantial presence test. They are also subject to U.S. taxes on income obtained from U.S. sources. 

• Independent personal services: Services performed by an independent contractor who is an NRA and self-employed.  

• Dependent personal services: Services performed by an employee who is an NRA and works for an employer.

• Tax treaty: A two-party agreement between two countries that establishes the rules and regulations over taxation of their residents’/citizens’ incomes. 

• Withholding agent: Any individual who can control or is in custody of the amount of withholdings an independent/dependent NRA is subject to on their income. 

• Taxpayer Identification Number (TIN): Any identification number used by the IRS. TINs include SSNs, Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), Taxpayer Identification Number for Pending U.S. Adoptions (ATIN), and Preparer Taxpayer Identification Number (PTIN). 

For more information and guidance on the key terms, refer to the Form 8233 instructions.