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Independent Contractors: U.S. Taxes for Noncitizens (2025 IRS Guide)

This guide covers “Independent Contractors” within u.s. taxes for noncitizens. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 519 (2025), U.S. Tax Guide for Aliens, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

The following discussion generally applies only to nonresident aliens. Tax is withheld from resident aliens in the same manner as U.S. citizens.

Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U.S. citizens. Therefore, your compensation, unless it is specifically excluded from the term “wages” by law, or is exempt from tax by treaty, is subject to graduated withholding.

Independent Contractors

If there is no employee-employer relationship between you and the person for whom you perform services, your compensation is subject to the 30% (or lower treaty) rate of withholding. However, if you are engaged in a trade or business in the United States during the tax year, your compensation for personal services as an independent contractor (independent personal services) may be entirely or partly exempt from withholding if you reach an agreement with the IRS on the amount of withholding required. An agreement that you reach with the IRS regarding withholding from your compensation for independent personal services is effective for payments covered by the agreement after it is agreed to by all parties. You must agree to timely file an income tax return for the current tax year.

Central withholding agreements (CWAs).

If you are a nonresident alien entertainer or athlete performing or participating in athletic events in the United States, you may be able to enter into a CWA with the IRS for reduced withholding, provided certain requirements are met. Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability.

For information on CWAs, including how to apply, see Form 13930 and go to IRS.gov/CWA.

A request for a CWA must be received by the IRS at least 45 days before the agreement is to take effect to ensure it is in place before the tour begins or the first event occurs, and it must contain all supporting documentation specified in the instructions, or no consideration will be given to entering into a CWA. Exceptions will be considered on a case-by-case basis.

Final payment exemption.

Your final payment of compensation during the tax year for independent personal services may be entirely or partly exempt from withholding. This exemption (does not apply to wages) is available only once during your tax year and applies to a maximum of $5,000 of compensation. To obtain this exemption, you or your agent must give the following statements and information to the Commissioner or Commissioner’s delegate.

  • A statement by each withholding agent from whom you have received gross income effectively connected with a trade or business in the United States during the tax year, showing the amount of income paid and the tax withheld. Each statement must be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury.

  • A statement by the withholding agent from whom you expect to receive the final payment of compensation, showing the amount of the payment and the amount of tax that would be withheld if a final payment exemption were not granted. This statement must also be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury.

  • A statement by you that you do not intend to receive any other income effectively connected with a trade or business in the United States during the current tax year.

  • The amount of tax that has been withheld or paid under any other provision of the Internal Revenue Code or regulations for any income effectively connected with your trade or business in the United States during the current tax year.

  • The amount of your outstanding tax liabilities, if any, including interest and penalties, from the current tax year or prior tax periods.

  • Any provision of an income tax treaty under which a partial or complete exemption from withholding may be claimed, the country of your residence, and a statement of sufficient facts to justify an exemption under the treaty.

  • A statement signed by you, and verified by a declaration that it is made under penalties of perjury, that all the information given is true and that to your knowledge no relevant information has been omitted.

If satisfied with the information, the IRS will determine the amount of your tentative income tax for the tax year on gross income effectively connected with your trade or business in the United States. Ordinary and necessary business expenses can be taken into account if proven to the satisfaction of the Commissioner or Commissioner’s delegate.

The Commissioner or Commissioner’s delegate will send you a letter, directed to the withholding agent, showing the amount of the final payment of compensation that is exempt from withholding and the amount that can be paid to you because of the exemption. You must give two copies of the letter to the withholding agent and must also attach a copy of the letter to your income tax return for the tax year for which the exemption is effective. For more information, see Pub. 515.

Refund of Taxes Withheld in Error

Multilevel marketing.

If you are a distributor for a multilevel marketing company who had taxes withheld in error, file a U.S. income tax return (Form 1040-NR or Form 1120-F) or, if a tax return has already been filed, a claim for refund (Form 1040-X or amended Form 1120-F) to recover the amount withheld in error. You must also attach to the U.S. income tax return or claim for refund supporting information that includes, but is not limited to, the following items.

  • A copy of your Form W-2, Form 1042-S, or Form 1099 to prove the amount of taxes withheld.

  • A statement explaining why income reported on your Form W-2, Form 1042-S, or Form 1099 is not subject to U.S. taxation.

  • A statement listing all the dates you entered and left the United States during the tax year. If the compensation is multiyear compensation, the statement must list all the dates you entered and left the United States during each of the tax years to which the compensation is attributable.

  • A copy of any documents or records that show the number of days you were actually present in the United States during the years listed.

  • A statement providing (a) the number of days (or unit of time less than a day, if appropriate) that personal services were performed in the United States in connection with recruiting, training, and supporting your lower-tier distributors; and (b) the total number of days (or unit of time less than a day, if appropriate) that personal services were performed globally in connection with recruiting, training, and supporting your lower-tier distributors.

  • Any further relevant document or record supporting your claim that the taxes were withheld in error.

Refund of taxes withheld in error on social security benefits paid to resident aliens.

Social security benefits paid to a lawful permanent resident (green card holder) are not subject to 30% withholding. For U.S. income tax purposes, green card holders continue to be resident aliens until their lawful permanent resident status under immigration laws is either taken away or is administratively or judicially determined to have been abandoned. See Green Card Test in chapter 1. If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the IRS. To obtain a refund, you must file a Form 1040 or 1040-SR. To determine if you are entitled to a refund, send your return to:

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301

You must also attach the following to your Form 1040 or 1040-SR.

  • A copy of Form SSA-1042S, Social Security Benefit Statement.

  • A copy of the green card.

  • A signed declaration that includes the following statements: “The SSA should not have withheld income tax from my social security benefits because I am a U.S. lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. I am filing a U.S. income tax return for the tax year as a resident alien reporting all of my worldwide income. I have not claimed benefits for the tax year under an income tax treaty as the resident of a country other than the United States.”

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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