About the nonresident alien withholding requirement
If this employee is considered a nonresident alien and subject to federal income tax withholding, you must select the appropriate nonresident alien withholding settings in the QuickBooks payroll setup interview. Why do I need to set up the nonresident alien settings in the payroll setup interview?
When you select Withhold as Nonresident Alien in the Nonresident Alien Withholding field in the payroll setup interview, QuickBooks specifies the correct filing status for the employee, accurately calculates the federal income tax withholding on each paycheck created for this employee, and properly tracks the amounts in the QuickBooks company file. The federal income tax calculation is based on the procedure provided in the IRS Publication 15 (Circular E), Employer's Tax Guide for withholding income taxes on nonresident alien wages.
If you attempt to set the filing status of a nonresident alien employee in the Taxes window of the employee record instead of in the payroll setup interview, QuickBooks will not automatically calculate the correct federal income tax withholding amounts. Instead you'll need to manually calculate the federal income tax withholding amounts on every paycheck created for this employee.
To do this task
Go to the Employees menu and click
What if the menu item isn't there?
Navigate to the Employee List. Show me
Click the Continue button in the lower-right corner of the payroll setup interview until you get to the Employee List panel, as shown here. Note that the arrow on the left-side of the panel identifies where you are in the interview.
In the Employee List, select the name of the nonresident alien employee and then click Edit.
On the employee setup panel, navigate to Enter federal tax information for employee. Show me
Click Next in the lower-right corner of the employee panel until you get to the Enter federal tax information for employee panel, as shown here.
Click the Explain link next to the Nonresident Alien Withholding drop-down list for more information about your options.
Select Withhold as Nonresident Alien in the Nonresident Alien Withholding drop-down list.
What if the employee's nonresident alien status changes?
If the employee's nonresident alien status changes—for example, from a nonresident to a resident alien—you must change the employee's federal tax setup in the payroll setup interview. To do so, follow the steps provided in this topic.
When you change an employee's federal tax setup because he or she is no longer considered a nonresident alien, be sure to change the Nonresident Alien Withholding setting, reset the correct filing status, and verify the withholding allowance in the payroll setup interview. For example, if the employee is married and submitted a new Form W-4 claiming Married as a filing status, be sure to reset the filing status from Single (the nonresident alien filing status) to Married.