(Approved by the Executive Vice President by authority of Executive Order No. 5)
The purpose of this policy statement is to provide a reference tool and administrative procedural guide for University departments that make payments to nonresident aliens in order to assure that the University fulfills its tax withholding and reporting obligations in accordance with federal laws and regulations. This policy statement does not cover all situations. It covers only the most common type of payments made to nonresident aliens invited to the University that are processed through the Purchasing/Accounts Payable or Travel systems. It does not apply to payments made to aliens who are appointed as University employees or who are awarded financial aid through scholarships or fellowships. Assistance with payments to aliens may be obtained from the following sources:
In no way should this guide be construed to be rendering legal or tax advice to nonresident aliens. Aliens who have specific tax questions or problems are advised to seek assistance from the Internal Revenue Service (IRS), a certified public accountant, or an attorney.
|a.||Nonimmigrant Visa Classification and Compensation
Generally, compensation for services performed as an independent contractor and travel or expense reimbursements may be made as shown in the following table, provided:
alien is invited and formally sponsored by the
University or has appropriate written authorization
to visit the University from the organization
that sponsored the nonresident alien's visit to
the United States.
alien obtains an Immigration and Naturalization
Service's Arrival/Departure Record, INS form I94
at the port of entry into the United States.
|The University is not legally authorized to pay
compensation when the individual's nonimmigrant visa classification
does not permit such payments or when the individual is not
in possession of the appropriate documentation. Departments
should contract the International Services Office, 2065430841,
to determine nonimmigrant visa classification and other factors
to consider before inviting an alien to visit the University.
In addition, if the alien is to be paid compensation as an
independent contractor during their visit and is from a country
having a tax treaty with the United States, the alien should
be furnished with an Exemption from Withholding on Compensation
for Independent Personal Services of a Nonresident Alien Individual,
IRS form 8233, to claim exemption from federal tax withholding
as described in these procedures at the time the invitation
to visit is extended. The alien should complete and return
the form prior to their arrival in this country. Exemption
from withholding on the basis of a tax treaty is only effective
for payments made at least ten days after the University has
accepted and mailed the Exemption from Withholding on Compensation
for Independent Personal Services of a Nonresident Alien Individual,
IRS form 8233, to the IRS.
|b.||Taxpayer Identification Number
While a taxpayer identification number (see Section 1.c.9 for a definition) is not required to receive payments as an independent contractor or to take advantage of tax treaty benefits to which the nonresident alien may be entitled, IRS regulations require a taxpayer identification number on any tax returns filed by a nonresident alien after January 1, 1997. Therefore, it is highly recommended that any invitation extended to a nonresident alien to visit the University include an Application for IRS Individual Taxpayer Identification Number, IRS form W7, and related instructions for the individual's use in obtaining an Individual Taxpayer Identification Number (ITIN), unless it is known that the individual has already been issued an ITIN or is required to have a United States Social Security Number. The Application for IRS Individual Taxpayer Identification Number, IRS form W7, and related instructions may be obtained from the International Services Office, 2065430841, for inclusion with letters of invitation, or is available at United States consulates.
ContractorAn independent contractor
is an individual who performs personal services
for the University, where the University has the
right to specify the result to be accomplished
but not the means and methods by which the result
is to be accomplished. Independent contractors
include guest lecturers, speakers, seminar participants
or leaders who are paid a fee (commonly referred
to as an honorarium) for performing the service.
Independent contractors also include individuals
serving in an advisory or consulting capacity
in the performance of research with a faculty
member or employee. For further information and
required documentation to substantiate independent
contractor status, see Administrative
Policy Statement 32.3.
honorarium is generally a payment to an individual
possessing recognized professional or scientific
credentials which uniquely qualifies him or her
to be a guest lecturer, speaker, seminar participant
or leader, and the fee to be paid for the service
is not established by a contractual agreement
between the University and the individual. The
fee is usually an amount determined by the sponsoring
department and is paid on a voucher prepared by
the sponsoring department rather than on an invoice
submitted by the individual performing the service.
citizens are classified as either resident aliens
or nonresident aliens.
AliensA resident alien for immigration purposes is an individual who is not a citizen
of the United States, who has been admitted
as an immigrant, and is authorized to live
and work in the United States indefinitely-commonly
referred to as a "green card" holder. A resident
alien for tax purposes must pay tax
to the United States government on his or
her worldwide income, regardless of source.
A resident alien for tax purposes can claim
exemptions for dependents and must file an
income tax return on IRS forms 1040, 1040A
AliensA nonresident alien for immigration purposes is an individual who is not a citizen
of the United States and who has been admitted
for a temporary stay that will end when the
purpose of the visit has been accomplished.
A nonresident alien for tax purposes is a non-United States citizen who, during
his or her stay in the United States, either
pays United States tax only on U.S. Source
income or is exempt from paying United States
taxes because of an income tax treaty between
the United States and the government of his
or her country of residence for tax purposes.
Generally, a nonresident alien for tax purposes
receives no tax exemption for dependents and
must file an income tax return on an Income
Tax Return for Nonresident Aliens, IRS form
of IncomePayment made to
a nonresident alien independent contractor is
"sourced" according to where the service is performed;
the place to which the payment is made, the organization
providing the funding, or the currency in which
the payment is made are not factors in
determining "source." Payment made to a nonresident
alien independent contractor is "U.S. Source"
income subject to federal taxes if the services
are performed in the United States; if services
are performed outside of the United States, the
income is "International Source" income and exempt
from United States taxation.
IncomeAny compensation paid
to a nonresident alien, or paid to a third party
on their behalf, on which taxes are required to
be paid to the United States government is taxable
income to the recipient. Employee wages, stipends,
independent contractor earnings, honorariums,
prizes and awards, and lump sum payments to defray
the costs of travel which are not accounted for
under an accountable travel plan are all considered
taxable income and federal taxes must be withheld
by the University from such payments at the appropriate
withholding rate. Reimbursement for travel expenses
(including living allowances) that are submitted
for reimbursement through an accountable plan
that reimburses the individual or makes payment
to a third party on the individual's behalf for
actual expenses incurred will not be considered
means that amounts necessary to cover United States
taxes will be taken out of the payroll, stipend,
independent contractor, or other payments made
by the University and remitted to the IRS as required
by federal laws. For payments to nonresident alien
independent contractors, the rate of withholding
is 30% unless federal tax is specifically exempted
by a tax treaty between the United States government
and the government of the nonresident alien's
country of residence. Invoking the provisions
of a tax treaty is not automatic.
The University is required to file an International
Person's U.S. Source Income Subject to Withholding,
IRS form 1042S, with the IRS by March 15
of each year to report the amount of all payments
made to the nonresident alien during the previous
calendar year, whether or not there was withholding
on the payments.
Note: As stated above, if the nonresident alien is not from a tax treaty country, or does not wish to invoke the provisions of the tax treaty, tax will be withheld from the gross amount to be paid at the rate of 30%. However, if the department desires the net payment to the nonresident alien to be a specific amount after withholding is applied, the net amount must be increased to cover the taxes to be withheld. The gross charge to the budget may be determined by the following formula:
Amount of net paymentExample: The department desires to pay a visitor an honorarium of $500 after taxes have been withheld. Applying the formula ($500/[1 .3] = $714.29), the department budget would be charged a total of $714.29.
TreatyAn agreement negotiated
between the United States government and the government
of another country that may qualify a nonresident
alien for exemption from income tax withholding.
It is important to note that the existence of
a tax treaty between the United States and the
nonresident alien's country of residence does
not always mean that the type of payment being
made by the University to the nonresident alien
is exempt from tax. Benefits of tax treaties vary
widely and some countries place specific dollar
and time limitations on the earnings that may
be exempted from tax under their treaty. IRS Publication 901
summarizes the benefits available to nonresident
aliens by virtue of tax treaties. A copy of IRS
Publication 901 may be obtained from the IRS.
Note: Tax treaties updated or newly ratified during the course of any calendar year are not effective until January 1 of the next calendar year, and are not incorporated into IRS Publication 901 until scheduled periodic updates. Questions regarding potential treaties with a country not listed in IRS Publication 901, may be sent via email to firstname.lastname@example.org.
in lieu of per diem reimbursements to visitors
who are not being paid compensation for the performance
of personal services. Typically, these visitors
are scientists, scholars, or students who are
invited to the University for training or information
exchanges. Living allowances are generally paid
only when the individual will be visiting the
University for at least 30 days and desires to
obtain lodging and/or meals from noncommercial
facilities (e.g., rent an apartment and prepare
their own meals).
Payments are made in 30-day increments starting at the beginning of the visit to cover monthly rent plus a reasonable amount for meals. If required by a rental agreement, the first monthly payment may include the rent amount for the first and last month, plus a damage deposit. The total of living allowances paid may not exceed the maximum per diem entitlement (lodging plus meals) had the individual stayed in and obtained meals from commercial facilities for the same period of time.
Generally, the individual is responsible for making his or her own arrangements for lodging and meals, and living allowances will be paid directly to the individual. Under exceptional circumstances, the University may contract with a third party for lodging to be provided to the nonresident alien; however, the total cost of leased lodging facilities may not exceed the lodging portion of the per diem entitlement had the individual stayed in commercial facilities. Leases for lodging on behalf of a nonresident alien who will be visiting for periods of 30 to 90 days will be negotiated by the Purchasing Department. Leases in excess of 90 days must be negotiated by the University's Real Estate Office. Payment of living allowances or contracting for lodging on behalf of the individual will not preclude the reimbursement of miscellaneous travel expenses (e.g., airfare, rental cars, taxis, etc.) normally authorized for reimbursement under University travel procedures.
Identification NumberA number
issued by an agency of the United States government
that identifies the taxpayer to the IRS on any
forms required to be filed in relation to federal
income tax administration. The Taxpayer Identification
Number (TIN) may be a United States Social Security
Number (SSN) issued to individuals by the Social
Security Administration, a Federal Employer Identification
Number (FEIN) issued to a United States business
entity by the IRS, or an Individual Tax Identification
Number (ITIN) issued by the IRS to an individual
who is a nonresident alien and who does not qualify
for an SSN. An SSN is required for any individual
(United States citizen, resident alien, or nonresident
alien) who will be paid as an employee by a United
States business entity.
RequisitionThis online document
is entered into the Purchasing/Accounts Payable
System (PAS) to initiate or confirm a purchasing
or travel action.
Versus Independent Contractor Classification ChecklistEmployee
Versus Independent Contractor Classification Checklist
form is used to determine whether an individual
performing services for the University should
be classified as an employee or as an independent
contractor. See Administrative
Policy Statement 32.3 for related
Alien Payment Data SheetThe
Nonresident Alien Payment Data Sheet form is used
to provide necessary information to determine
federal tax withholding status and to be able
to report payments made to a visiting nonresident
alien as required by the IRS.
Record, INS form I-94, is issued by the Immigration
and Naturalization Service to nonimmigrant aliens
upon arrival in the United States. An individual
in possession of the departure portion of this
may only be compensated if the document is annotated
with an appropriate nonimmigrant visa classification.
The expiration date is noted on the form. Note: A copy of this form must be attached to the University's
Nonresident Alien Payment Data Sheet form.
from Withholding on Compensation for Independent
Personal Services of a Nonresident Alien IndividualThe
Exemption from Withholding on Compensation for
Independent Personal Services of a Nonresident
Alien Individual, IRS form 8233, is required to
be filed with the IRS to substantiate exemption
from federal tax withholding on U.S. Source compensation
paid to a nonresident alien performing services
as an independent contractor. The form and instructions
for its completion may be obtained from the International
Services Office, 2065430841, or by
making an email request to email@example.com.
Departments are encouraged to furnish the visitor
with this IRS form for completion prior to the
visitor's arrival at the University. The visitor
should be directed to return the completed form
to the sponsoring department for forwarding (original
and two copies required) to the Accounts Payable
Office, Attn: NRA Desk, Box 351130. This
form is required to be certified by the Accounts
Payable Office and filed with the IRS on behalf
of the visitor a minimum of ten days prior to
making a payment that is to be exempt from tax
Exemption or Reduced Rate CertificateThe
Ownership, Exemption or Reduced Rate Certificate,
IRS form 1001, is required to be filed to substantiate
exemption from federal tax withholding on payments
other than on compensation paid to an independent
contractor, including fellowships and scholarships.
The form and instructions for its completion may
be obtained by sending an email request to firstname.lastname@example.org.
University's Invoice Voucher/Receiving Report
form is used as an invoice to substantiate payments
by a vendor who has no invoice form of his or
her own, or when a vendor or claimant invoice
would not be expected. The form is available from
|8)||Travel Expense VoucherThe Travel Expense Voucher (TEV) form is used to substantiate reimbursement of travel expenses. The form is available from University Stores.|