Payments to Foreign Visitors – Revised
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.
- In addition, all payments are subject to federal income tax withholding unless they are specifically exempted by the U.S. tax law, or by an income tax treaty.
- (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 Ms. Kathy Jones at 2-1241 in Payables and Disbursement Services if you have additional questions. You can access more information on this subject via the University Payroll Services WEB Homepage at:
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).