H-2A workers are exempt from social security, Medicare and federal unemployment taxes. They are also exempt from federal income tax withholding, but are not exempt from filing income tax returns and paying income tax.
H-2A workers may volunteer for FITW; employers may agree to withhold, but don’t have to.
We recommend that workers in their first year of employment in the U.S. not withhold; instead, make quarterly estimated tax payments.
If you withhold, have the worker complete and sign form W-4 and either on the form or on a separate statement, state that he/she is requesting/volunteering to withhold.
Report H-2A Wages on Form W-2. Boxes 3,4, 5 & 6 are all zeros.
On Form W-2, don’t check box 13 (Statutory employee), as H-2A workers aren’t statutory employees.
Contact your state agencies to determine SUTA and State withholding rules. Inform agency that you have a foreign worker who, under federal law is exempt from federal income tax withholding and exempt from federal unemployment tax. Ask if state law conforms to federal law in these areas. If it does, worker will also be exempt from SUTA and SITW. If you ask about H-2A workers, they probably won’t know what you are talking about. The answer you get may not be correct.
WITHHOLDING- How Much?
The amount to withhold is dependent of the taxpayer’s tax residency-Full year resident, dual status resident or nonresident. For residents, it is also dependent on marital status and whether or not the worker will be filing a joint return.
For single workers and married workers filing separately who will be deemed full year residents in the current tax year (i.e., they filed/were eligible to file a resident of dual status resident return in the prior year).
For married workers who will file a joint return with a nonresident spouse.
Be sure to enter the correct payroll period and the contract (paid employment) start and end dates.
The calculator will estimate the worker’s 2018 income tax liability and tell you how many allowances to use on the form W-4
After the W-4 is complete, use the tables in Pub 15 (pp 44-67) to determine how much to withhold each pay date.
To use the IRS calculator for nonresident and dual status resident filers, you must increase the worker’s estimated annual wage by $7,850.
Pub 15 provides tables to help you determine the worker’s withholding based on the length of the pay period, the amount of wage and the number of allowances claimed on the Form W-4.
Pub 15 directs you to increase the annual wage by $7,850 when determining the withholding for nonresident filers.
This also applies to dual status resident filers, because they too do not get the standard deduction.
You may now use the IRS W-4 calculator to determine how to complete the W-4. Add $7,850 to the nonresident/dual status filer’s annual wage when using the W-4 calculator.