Source of Income for Federal Taxation and Reporting Purposes – Non-US Citizens
For Federal Taxation and Reporting Purposes – Non US Citizens
For federal tax purposes, the Internal Revenue Service classifies income into two sources. The income can either be U.S. source or foreign source. The source of income depends on the location of the payor, location of service provided, and the type of payment made.
Resident aliens are taxed on their worldwide income. Nonresident aliens are taxed on their U.S. source only. Foreign source income paid to a nonresident alien is not tax reported and is not subject to U.S. taxes. The table below illustrates this.
Source of Income for Federal Taxation and Reporting Purposes – Non US Citizens
| Type of Income | Source Determined by | Location of Services |
|
|---|---|---|---|
| In the U.S. | Not in the U.S. | ||
| Employment | Where the services are performed | U.S. Source | Foreign Source |
| Independent Personal Services | Where the services are performed | U.S. Source | Foreign Source |
| Royalties | Where property is used | U.S. Source | Foreign Source |
| Fellowship/Scholarship | Residence of Payor | US Payor: U.S Source Foreign Payor: Foreign | US Payor: Foreign* Foreign Payor: Foreign |
| *the IRS has decided the payor must also be considered when sourcing a Fellowship/Scholarship payment. | |||