I (F-1 visa holder from India) started working in the U.S. earlier this year under STEM OPT. When I joined, I submitted Form 8233 to claim the India–U.S. tax treaty benefit that exempts the first $5,000 of income from federal income tax.
Everything was fine at first — no federal tax was withheld, which made sense. But now I’ve earned more than $5,000, and I noticed that my paychecks still have zero federal tax withheld.
I checked my payroll portal (Paycor), and it looks like there’s an “override” keeping my federal withholding at $0. My HR team told me I might need to remove that override so that taxes start being deducted again.
I just emailed them explaining that the treaty exemption only covers the first $5,000 and that I want withholding to resume for the rest of the year.
Did I do the right thing here? Am I in any kind of trouble with the IRS for this oversight?
From what I understand, I’ll just owe taxes on the amount over $5,000 when I file my 1040-NR next year, right?
Appreciate any advice from anyone who’s been through this!
marked myself “exempt” from federal tax withholding under the India–US treaty — did I mess up?
byu/Aggravating_Today123 intax
Posted by Aggravating_Today123
1 Comment
IRS just cares that your payments are accurate, whether it’s by withholding or by paying them directly. Worst case is that you have a small penalty (in lieu of interest) for not paying on time.
Everything else is between you and your employer to get the withholding right. I’m not terribly surprising they are struggling to handle a partial exemption from a treaty benefit.
I’m also not sure you are accurately describing the treaty benefit here, but did not fully research it. The first point holds that the IRS just wants accurate timely payments by any method.