Payments to Foreign Visitors

John P. Kruczek, University Controller

The University has unique tax reporting and withholding obligations, required by the Internal Revenue Service, when making payments to foreign visitors and scholars for Scholarships/Fellowships, Services Rendered, and any other payments to non-resident aliens. A non-resident alien is anyone who:

• Does not have a Green Card, or
• Does not pass the Substantial Presence Test – i.e., must be physically present in the U.S. at least 31 days during the current calendar year, AND 183 days during the three year period that includes the current year and the two proceeding calendar years.

The rules and regulations relating to the taxation of nonresident aliens are complex and ambiguous. Therefore, you should make advance arrangements with Payables and Disbursement Services and the Office of International Studies when you are planning for foreign visitors. The following summary highlights these rules:

NONRESIDENT ALIEN TAX SUMMARY

• Each payment requires the review of certain key factors:

  VISA (A summary of VISA types and Allowable Payments is attached).

  U.S. Residency Status (U.S. citizen, resident alien, nonresident alien i.e. Green Card or Substantial Presence Test).

• All payments made to or on behalf of a nonresident alien must be reported to the Internal Revenue Service (IRS). This reporting is coordinated by University Payroll Services and Accounts Payable.

  (Note, there are tax treaties with over 45 countries, each of which is unique).

• Payments requiring federal income tax withholding are taxed at 14 percent for Scholarship/Fellowship and 30 percent or graduated withholding rates depending on the type of payment or tax treaty provisions for all other payments.
• If a nonresident alien is exempt from federal income tax withholding because of either U.S. tax law or a tax treaty, that individual must file the appropriate form, as listed below at least 10 days prior to payment: 

  Form 8233 – for Compensation (independent contractors and employees) and related payments

  Form 1001 – for Scholarships, fellowships (no service required), and royalties

• Examples of payments made to nonresident aliens include, but are not limited to:

       wages/compensation                       scholarships
       stipends                                 fellowships
       independent contractor payments          book allowances
       consultant payments                      living allowances
       honoraria                                prizes/awards
       travel reimbursements                    royalties/commissions

  Note: Payments do not have to be paid in cash; credits to a student’s account are included under these requirements. In addition, payments to third parties on behalf of non-resident aliens are also reportable, such as direct payments for hotel accommodations and airline tickets.

Because of the complexity of the tax reporting and withholding process for foreign visitors you should contact both the Office of International Studies and Payables and Disbursement Services to help you plan the documentation that will be needed to ensure a prompt payment. Please contact Mr. Murphy Miller at 2-1321 in University Payroll Services if you have additional questions.

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SCHEDULE OF VISA AND ALLOWABLE PAYMENTS

Immigration      Description                     Independent    Travel/Expense
  Status                                         Contractor     reimbursements
  VISA                                           or Lecturer
                                                  Payment 

A-1   Diplomats & foreign government officials       YES              YES

B-1   Business Visitor                                NO              YES

F-1   Students                                       YES              YES

G-1   Employees of international organizations       YES              YES

H-1A  Nurses                                          NO              YES

H-1B  Professionals                                   NO              YES

J-1   Exchange visitors including students,          YES              YES
      scholars and trainees.

M-1   Vocational student                             YES              YES

Q-1   International cultural exchange                YES              YES

WB    Alien treated as a B-l visitor (for             NO              YES
      payment purposes) admitted without a 
      visa under Visa Waiver Program

WT    Alien treated as a B-2 tourist (for             NO               NO
      payment purposes) admitted without a 
      visa under Visa Waiver Program

TN   (Used by Canadian and Mexican resident           NO              YES
      under NAFTA. A TN status is issued in 
      lieu of a H-1 visa, or other work 
      authorized status, and holder may receive 
      compensation only as an employee. Travel 
      expense reimbursements may be paid).

TD   (Used by Canadian and Mexican residents          NO               NO
      under NAFTA. Dependents of a TN holder.
      A TD is similar to a B-2 visa (for
      Payment purposes).