Exceptions to Withholding Policy

Publication 519

Chapter 8 - Paying Tax Through Withholding of Estimated Tax

Withholding Exemptions

As a result of agreements between their home countries and the U.S. , citizens of Canada, Mexico, Japan, Korea and India may claim more than one withholding allowance on Form W-4.

Canada and Mexico: Married residents of Canada and Mexico may claim an allowance for their spouse if the spouse is not the dependent of another U.S. taxpayer, and if he/she had no taxable income for U.S. purposes. Mexican and Canadians may also claim deductions for their dependents.

Japan and Korea: Nationals of Japan and Korea may also take allowances for their spouse and dependent children who lived with them in the U.S. at any time during the tax year. Full dependent allowances are permitted if:

  1.  the spouse and/or children do not have income from U.S. sources and are not claimed as dependents on someone else’s U.S. tax return, and
  2.  the nonresident alien from Japan or Korea earned only U.S. source income connected with trade or business. If you are a citizen of Japan or Korea and you earned income from foreign sources, consult IRS publication 519 for more information.

India: Students from India may take an additional allowance for his/her spouse if the spouse has no gross income, is not claimed as a dependent by another U.S. taxpayer, and the couple does not file a joint tax return. An allowance for a child who lives with the student and who is a resident of the U.S. , Canada , or Mexico can also be claimed as an exemption. Indian students are entitled to the standard deduction on federal income tax returns.