Payments to Non-Resident Aliens

John P. Kruczek, University Controller

State Comptroller’s Memorandum No. 14 (1995-96) announced the implementation of new processing procedures and tax withholding and reporting requirements applicable to payments to non-resident aliens? including payments made through Payable and Disbursement Services.

The University of Florida academic environment is enriched by foreign visitors through many diverse activities, including research, lectures, seminars, workshops and consultations. However, the complexity of U.S. tax law applicable to non-resident aliens imposes a substantial burden for compliance and documentation on the University. Similarly, payments to and contracts with an alien must also comply with the regulations of the Immigration and Naturalization Service. When payments are permissible the University has a clear obligation to withhold tax at the time of payment and report earnings to the Internal Revenue Service. Failure to do so will result in penalties to both the University and the person paid.

These requirements also apply to payments made by the University of Florida Foundation, The University of Florida Research Foundation or other University support organizations.

When the University makes payments to foreign visitors, including travel reimbursements, certain factors must be reviewed. These factors help to determine whether the person must be paid through the Payroll/Personnel system or through Payable and Disbursement Services. They also determine the tax withholding and information reporting requirements related to the payments. The principle factors to consider are:

• The relationship of the University to the person who provides services, i.e. whether the person is an employee or an independent contractor. Refer to State Comptroller’s Memorandum No. 7 (1988-89), and University Controller’s Memorandum Number 95-019, dated June 16, 1995, for additional information. 
• Whether the person is a U.S. citizen, permanent resident or non-resident alien. 
• Whether the sources of funds that are to be paid are U.S. or Foreign. 
• Whether the services are performed in the U.S. or outside the U.S. 
• The person’s visa type and the allowable payment types under such visa. 
• The applicability of any foreign country tax treaties and exemptions.

Regulations regarding tax withholding on payments to aliens differ from those regarding U.S. citizens. As a result, payments to non-resident aliens made through Payable and Disbursement Services, including travel reimbursements, may be subject to tax withholding. If tax treaties and exemptions are applied to reduce withholding, documentation must be provided to establish and report the application of such treaties. In addition, there may be cases where the withholding requirements do not apply, but income reporting requirements do apply.

When our intent is to employ an alien, the appropriate personnel office should be contacted regarding the procedural and documentation requirements. The attached worksheet can help determine the proper method to use when paying non-resident aliens. When any payment to an individual is to be requested through Payable and Disbursement Services, the attached Consulting and Professional Services Worksheet should be prepared and submitted with the requisition or payment request form. If the Worksheet establishes that the payee is an independent contractor and is a U. S. Citizen or permanent resident, the payment may be made through Payable and Disbursement Services and any necessary tax reporting will be issued on Form 1099. If the Worksheet indicates that the payee is an independent contractor and a nonresident alien, the payment will be made through Payable and Disbursement Services, following contact with both the Office of International Studies and Programs at 392-5323, for information regarding visa and sponsorship rules, and the Payroll Department at 392-1231, for taxation and documentation requirements. If the Worksheet indicates that the circumstances constitute an employer/employee relationship, the payment request should be referred to your personnel office.

Because of the unique taxation and reporting requirements for non-resident aliens, a careful review of planned payments in advance of their arrival is critical to issuance of a purchase order, vendor number, or to initiate a payment. To assist you in understanding these complex requirements we will be offering workshops on this topic at the following times and locations:

Friday, October 13, 1995
10:00 a.m. – 12:00 noon
Room 282 Reitz Union

Monday, October 16, 1995
10:00 a.m. – 12:00 noon
Room 282 Reitz Union

Tuesday, October 24, 1995
1:00 p.m. – 2:00 p.m.
Room Cl-17 JHMHC

Wednesday, October 25, 1995
1:00 p.m. – 2:00 p.m.
Room CI-7 JHMHC

Please encourage your fiscal staff to call 392-1321 to participate in one of these workshops. This information will also be available at Payroll Services.

If you have any questions regarding this information, please call Murphy Miller at 392-1231. Thank you for your cooperation.