Foreign Nationals Taxation
US tax law requires the University to withhold federal income tax from and report to the Internal Revenue Service (IRS) all payments made to or on the behalf of a nonresident alien. Therefore, in order for the University to be in compliance with this law, the University must be able to identify all payments made to a nonresident alien or to a third party on his or her behalf. The University is then required to apply the appropriate tax withholding and report the payments made to those individuals in the correct manner. Please note that the US tax withholding and reporting rules governing nonresident aliens are quite different than those governing US citizens and resident aliens.
The Payroll/Tax Compliance Office monitors all payments made by the University (i) for possible nonresident alien tax withholding and reporting liability, (ii) to ensure compliance with all IRS rules and regulations, and (iii) to confirm that all information and required forms have been completed and collected. The Payroll/Tax Compliance Office is charged with making the final determinations of US tax residency status and applying applicable tax withholding and reporting requirements for all payments made by the University.
Types of Payments Made to Nonresident Aliens
The University is required to withhold US income tax at the time a payment is made to a nonresident alien or to a third party on his or her behalf; if the University does not withhold the appropriate amount of tax at the time of payment, the University can be held liable for the tax that is not withheld. The types of payments to which this rule applies include, but are not limited to:
- Wages, salary or compensation
- Independent Contractor Payments
- Scholarships/Fellowships
- Stipends
- Book allowances
- Living allowances
- Honoraria or Guest Speaker Fees
- Prizes/Awards
- Royalties/Commissions
- Travel Reimbursements
- Interest
After the University has determined the individual’s resident status for tax purposes and the amount of income subject to taxation, the University must then determine the appropriate amount of tax to withhold and must collect any additional required information. These withholding and reporting determinations are based upon the type of payments made to the individual.
Payments Made to New Employees through the Payroll System
All full-time or part-time new employees are required to complete a Form I-9 (Employment Eligibility Form) at the time of hire. It is the responsibility of the hiring administrative unit to administer and certify the Form I-9 and to determine the new employee’s authority to work.
If the new employee indicates on Question 4 on the Form I-9 that he or she is not a US citizen or a permanent resident (or other foreign national with legal work status), the University official responsible for administering and certifying the Form I-9 is then responsible for notifying the Payroll/Tax Compliance Office at x2673.
Requesting Payments through Accounts Payable
The question regarding citizenship status on the Authorization for Professional Services Form or Scholarship/Fellowship Award Form must be answered for all payments made to individuals and/or associated with travel (including direct bill). If the question is not answered, the payment will not be processed. When making a payment through Accounts Payable, it is the responsibility of the individual who is requesting payment to determine the payee’s citizenship status. Such a determination should be made by asking each payee about his or her citizenship status, regardless of whether there is reason to believe that the individual may or may not be a US citizen. If the payee is a third party who is being paid on the behalf of another individual, the question regarding citizenship applies to that of the true beneficiary of the income, not the check payee.
Last Updated: July 24, 2007
