Tax Treaty Logic Overview

Step 1 — Residency classification

The engine classifies the individual as a likely Nonresident Alien (NRA) or Resident Alien (RA) using commonly applied IRS residency frameworks (e.g., exempt individual years and the substantial presence test context). This classification drives whether treaty workflows apply and which forms are relevant.

Step 2 — Income category mapping

The engine maps the user’s income type into a category that drives withholding logic: personal services (wages/comp) vs. scholarship/fellowship vs. other FDAP.

This step matters because 8233 is typically used for eligible personal services treaty claims, while W-8BEN is used for eligible treaty claims on certain non-service/FDAP categories.

Step 3 — Treaty article selection

If a treaty applies, the engine selects the likely treaty article family based on the scenario (e.g., student/trainee, teacher/researcher, or personal services). It then evaluates the common conditions associated with the scenario (such as time limits, caps, and category restrictions).

YourPayBot documents treaty outcomes as “article + rate/cap/limit + conditions” so payroll reviewers can validate the reasoning quickly.

Step 4 — Conditions and limitations

The engine checks for common disqualifiers or “needs review” flags, such as missing identifiers, eligibility windows, employer context constraints, and scenario mismatches.

• If a required identifier is missing, the engine may recommend withholding until it is obtained.
• If inputs suggest the treaty benefit does not apply, the engine returns a “not eligible” result with a reason.
• If a claim is plausible but ambiguous, the engine returns a warning for manual review.

Step 5 — Form selection

Based on classification + income type + treaty conditions, YourPayBot selects the recommended form:

• Form 8233 for eligible personal service treaty claims (when required conditions are satisfied).
• Form W-8BEN for eligible treaty claims on certain non-service/FDAP categories (where appropriate).
• W-4 fallback when treaty claiming is not eligible or cannot be supported with required identifiers.

Step 6 — Output package

The engine outputs a standardized summary (classification, inputs, treaty reference, recommended form) plus warnings and a technical details block that can be used for payroll audit trails.