Unlike most United Nations member countries, the United States does not exempt from tax the wages paid by the UN to US citizens employed in the US. At the same time, per the International Organization Immunities Act (22 USC 288), the UN is not subject to the requirement to withhold tax from the wages paid to US citizens.
Thus, the UN does not withhold any federal or state tax from the wages of its employees who are subject to US taxation. This includes both income tax as well as social security and Medicare taxes.
Instead of providing a Form W-2, the UN issues a statement of taxable earnings that functions as a substitute W-2 for tax preparation purposes. (The UN recommends attaching this statement to the tax return.)
Thus, the individual tax return for a US citizen employed by the UN has the following characteristics:
- The statement of taxable earnings is entered as a substitute W-2.
- Self-employment taxes are calculated (for the purpose of contributing to the social security program).
- Estimated tax payments may need to be entered if the taxpayer authorized the UN to make them.
Enter the taxable earnings
To report taxable earnings paid to a U.S. citizen, from the Federal Section of the tax return (Form 1040) select:
- Form W-2
- Check the This is a substitute W-2 check box.
- If the statement indicates a Federal EIN, enter it under the employer information. Otherwise leave the EIN field blank. Note that a return that includes a W-2 without an EIN cannot be electronically filed.
- Enter total remuneration per the statement in Box 1
- Zero out the SS Wages and Medicare Wages.
- When finished, click Continue.
- How did you determine the amounts on the Substitute W-2? - Enter UN statement of taxable earnings.
- Explain your efforts to obtain Form W-2? - Enter Not applicable.
Complete Schedule SE
To complete Schedule SE, from the Federal Section of the tax return (Form 1040) select:
- Other Taxes
- Self-Employment Tax - If filing MFJ, indicate if the schedule is for the taxpayer or spouse.
- Adjustment to Nonfarm Income - Enter total remuneration per the statement.
Enter estimated taxes, if applicable
If the taxpayer arranged for the UN to make quarterly estimated tax payments to the IRS, report those in the tax return here:
- Payments & Estimates
- Federal Estimated Tax Payments - Enter the amounts as reported by the UN. Note that the UN generally treats an overpayment of estimated taxes from the prior year as a carryover to the current year.
The UN reimburses US citizen-employees their income taxes as well as half their self-employment tax. An employee can also arrange with the UN to have estimated taxes paid to the IRS on their behalf. The UN publishes an annual information circular for employees subject to US taxation that covers all the procedures employees are to follow with respect to these and other payroll and taxation issues. As such, if you or the employee have any questions beyond the information covered in the circular you should contact the Income Tax Unit at the UN. See here for contact information.
Note: This is a guide to preparing the individual tax return for a US citizen employed by the UN in the TaxSlayer Pro program. It is not intended as tax advice.