Source: https://www.irs.gov/businesses/industry-directors-directive-2-employment-tax-and-the-employees-on-the-us-outer-continental-shelf
Timestamp: 2018-12-11 07:29:16
Document Index: 617545178

Matched Legal Cases: ['§ 864', '§ 1', '§ 1441', '§ 1', '§ 3101', '§ 3301']

Industry Director’s Directive # 2—Employment Tax and the Employees on the U.S. Outer Continental Shelf | Internal Revenue Service
MEMORANDUM FOR INDUSTRY DIRECTORS, LB&I
FROM Keith M. Jones /s/ Keith M. Jones
SUBJECT Industry Director’s Directive # 2—Employment Tax and the Employees on the U.S. Outer Continental Shelf
on the OCS, are generally engaged in a U.S. trade or business. I.R.C. §§ 864(b), 638(1); Treas. Reg. § 1.638-1(a), (c).
Code section 1441 provides for a 30% withholding tax on the gross amount of salaries, wages, compensation, remuneration, or other fixed or determinable annual or periodic income derived by a nonresident alien employee from U.S. sources. Withholding under section 1441 is not required to the extent it is required under Code section 3402. I.R.C. § 1441(c)(4); Treas. Reg. § 1.1441-4(b)(1).
In the absence of a treaty exemption from federal income tax withholding, a nonresident alien employee may claim withholding allowances on Form W-4, Employee’s Withholding Allowance Certificate. Notice 2005-76, 2005-2 C.B. 947, provides special rules for nonresident alien employees to use to complete Form W-4 and for employers to determine how much income tax to withhold from wages under Code section 3402. Notice 2009-91, 2009-48 I.R.B. 717, modifies Notice 2005-76 for wages paid to nonresident alien employees on or after January 1, 2010, through the end of calendar year 2010 only. Notice 2011-12, 2011-08 I.R.B. 717, announced that Notice 2009-91 has no effect for wages paid on or after January 1, 2011. Therefore, the modification to Notice 2005-76 made by Notice 2009-91 only applies for calendar year 2010 and does not apply for wages paid on or after January 1, 2011. Notice 2005-76 continues in effect for wages paid on or after January 1, 2011. Generally, a nonresident alien employee is only entitled to claim one withholding allowance on Form W-4. If the nonresident alien employee does not furnish a fully completed Form W-4 to his or her employer, the employer is required to withhold as if the nonresident alien employee were a single person with no withholding allowances.
Code sections 3101 and 3111 contain FICA tax provisions for employees and employers. FICA tax is calculated as a percentage of wages and imposed in addition to other taxes on those wages. I.R.C. §§ 3101, 3111, and 3121(a). Wages that are covered by a totalization agreement, as evidenced by a certificate of coverage issued by a foreign country, are exempt from FICA tax. The Social Security Administration’s website provides a list of countries with which the United States has entered into a totalization agreement.
An employer is liable for FUTA tax in an amount equal to a certain percentage of total wages paid by the employer during the calendar year. I.R.C. §§ 3301, 3306. The employer is subject to FUTA without regard to whether it is required to make contributions to, or its employees are eligible to receive benefits under, a state unemployment compensation law. Rev. Rul. 75-87, 1975-1 C.B. 325. An employer is never exempt from FUTA under a treaty or totalization agreement.
Examiners who are contacted by employers with questions about employment tax obligations for individuals employed on the OCS should notify the OCS compliance steering committee of the contact.
Questions should be directed to the following IRS personnel:
Project Code 0555