Do You Work for a Foreign Government or International Organization in the U.S.? You are not a U.S. Citizen?
January 2, 2023
by: Marc J. Strohl, CPA, Protax Consulting Services Inc.
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The goal of this article is to provide a comprehensive checklist of information. This article is not designed to teach you the required technical competence required to perform self compliance; however, it will certainly arm you with the required technical knowledge to determine if your U.S. Certified Public Accountant (CPA) tax preparer knows all that they should know to provide you with technically competent professional services.
Compensation of Employees of International Organizations and Foreign Governments- IRC Sec 893
An International Organization is an organization designated by the President of the U.S. through an Executive Order to qualify from the privileges, exemptions, and immunities provided in the International Organizations Immunities Act.
Under the IRS IRC Sec 893, only the compensation- including wages, fees or salaries of non-U.S. citizen employees received from a foreign government or international organization for work performed in the U.S. shall not be included in gross income and will be exempt from U.S. taxation.
The above exemption is limited by the execution and filing of the waiver provided for in section 247(b) of the Immigration and Nationality Act (I.N.A.) (8 U.S.C. 1257(b)). This waiver is obtained using U.S.C.I.S. Form I-508- Request for Waiver of Certain Rights, Privileges, Exemptions and Immunities.
Form I-508 is used by Lawful Permanent Residents and nonimmigrant statuses conferred under I.N.A. 101(a)(15)(A), (E) or (G)- to waive diplomatic rights, privileges, exemptions and immunities to maintain, acquire or obtain lawful permanent residence.
Lawful Permanent Residents in such occupations who do not waive the exemption using Form I-508 and who fail to pay their U.S. income taxes may be adjusted to I.N.A. 101(a)(15) A, G or E status.
Conversely nonimmigrants on I.N.A. 101(a)(15) A, G or E status who do not waive the exemption and who fail to pay their U.S. income taxes, may be unable to adjust status to Lawful Permanent Resident status.
Taxpayers affected by IRC Sec 893 earning other sources income, including self-employment, interest, dividends, rents, royalties, etc…within the U.S. (from U.S. sources) are not exempt income, unless affected by a U.S. income tax treaty provisions and such income must be reported on Form 1040NR- U.S. Nonresident Alien Income Tax Return. Additionally, IRC Sec 893 will not apply in the case of foreign government employees whose employment services are primarily in connection with a commercial activity.
In the case of a foreign government employee the U.S. requires that the foreign government grant an equivalent exemption to employees of the U.S. government performing services in that foreign country. Further the Secretary of State is required to certify to the Secretary of the Treasury the names of those foreign countries that grant an equivalent exemption to employees of the U.S. government and the character of the services performed by the employees in the foreign country.
Marc J. Strohl, CPA is a Principal at Protax Consulting Services Inc.
He may be reached at: Tel: (212) 714-1805, Fax: (212) 714-6654
Web site: www.protaxconsulting.com