1040 NR for H2A visa

[dixontaxvt]

Hello Community,

I have a client who visited the United States in 2020 on an H2A visa - from Jamaica. My dead end with this return is two-fold - 1. I see an issue with the W-2 to start out with. The employer marked my client as a statutory employee, when according to IRS guidance a farm worker on an H2A is not a statutory employee but a regular employee who in most cases is not subject to payroll taxes or withholding tax. My inclination is to enter the W-2 without checking the statutory employee box and include an attachment with the return stating that H2A employees are not statutory. IF this is not what I'm going to do, this makes my second issue with this client a bit more difficult, because the line for income exempt from tax by a treaty is below the wages line, not the Sched C line, and the software is not subtracting the income exempt from the treaty to calculate tax when I enter the income as Sched C. 2. Per Publication 901, tax treaties, my client is exempt from income taxes if a. he is in the United States for no more than 89 days during the tax year, b. he does not have a fixed base regularly available to him in the United States, AND c. he earned income from services from a US contractor that is not more than $5,000. My issue is that he DID earn more than $5,000 as a farm worker however I cannot figure whether the first $5,000 is still eligible under the treaty or if he now just owes tax on the entirety of his income. The guidance does not seem to clearly spell this out, and I also have not been able to find any specific information on the treaty or special rules that apply to taxpayers on an H2A visa. 

Any input or advice would be greatly appreciated.

Alexander Dixon, EA 

[qbteachmt]

"and I also have not been able to find any specific information on the treaty or special rules that apply to taxpayers on an H2A visa."

Like this?

Here: https://www.irs.gov/individuals/international-taxpayers/foreign-agricultural-workers

Are you not able to have that employer issue a corrected W2?

[qbteachmt]

I was reading the treaty and explanation, where you have the AND, they have OR.

Documents are here:

https://www.irs.gov/businesses/international-businesses/jamaica-tax-treaty-documents

"2. Income derived by an individual who is a resident of a Contracting State from the
performance of personal services in an independent capacity in the other Contracting State may be taxed by that other Contracting State, if:
(a) he has a fixed base regularly available to him in the other Contracting State for
the purpose of performing his activities; in that case, only so much of the income as is
attributable to that fixed base may be taxed in that other Contracting State;
(b) he is present in that other Contracting State for a period or periods aggregating
90 days or more in the taxable year; or
(c) the net income derived in the taxable year from residents of that other
Contracting State for the performance of such services in the other Contracting State
exceeds 5,000 United States dollars or its equivalent in Jamaican dollars"

"Paragraph 1 of this Article provides that income derived by an individual who is a
resident of a Contracting State from the performance of personal services in an independent capacity shall generally not be taxable in the other Contracting State. However, such income may also be taxed in the other Contracting State if such services are performed in that other State and either: the income is attributable to a fixed base in that other State which the individual has regularly available for the purpose for performing his activities; the individual is present in that other State for 90 days or more in the taxable year; or, net income derived by the individual from residents of that other State exceeds $5,000 (or its equivalent in Jamaican dollars) during the taxable year. In the third case, if the net income exceeds $5,000, the entire amount may be taxed by the other State.

The term "fixed base" is not defined but, in general, is intended to be the same as a permanent establishment."