Orion

Foreign Visitor Tax Guide

Introduction
Salary and Wage Payments to Nonresident Aliens (NRA)
Honorarium and Expense Reimbursement Payments to Nonresident Aliens (NRA)
Scholarships, Fellowships, and Grants Paid to Nonresident Aliens (NRA)
Frequently Asked Questions

Introduction
This information is to be used by ASU faculty, staff, and foreign visitors (Students, Teachers, Researchers, and Guest Lecturers). In addition, it is to be used as a reference tool for university personnel that interact with foreign visitors who have a financial relationship with ASU.

This guide does not cover all tax situations. It covers only those most common to the majority of foreign students, faculty, and staff. It presents basic information about determining the tax status of various kinds of university payments to students, faculty, and staff. It is intended to provide information that will assist foreign visitors and university personnel in making decisions concerning the tax implications of payments that ASU makes to our foreign visitors.

The guide specifically provides information about three types of payments to foreign visitors:

  • Employee Compensation (Salary and Wages)
  • Honorarium and Expense Reimbursements  
  • Scholarships, Fellowships and Grants

ASU just fulfill its tax reporting obligations and can, in case of a tax question or problem, assist in supplying payroll and other appropriate documentation to explain payments made to individuals.

Users of this guide should be aware of the necessary limitations on the information presented herein. While it is hoped that this material will be useful, it should not be considered as a complete treatment of all tax or immigration questions.

This information in no way should be considered as rendering legal or tax advice.   

Foreign students, faculty, and staff with tax questions or problems are advised to seek assistance from the IRS or a Certified Public Accountant. In the U. S., the individual taxpayer is responsible for filing an appropriate and accurate tax return and negotiating all tax matters with the IRS. Taxpayer assistance is available by calling the IRS toll free taxpayer assistance number, 1-800-829-1040.

Salary and Wage Payments to Nonresident Aliens (NRA)
Department personnel, who plan to employ a Nonresident Alien must first contact the Office of International Education and Development Office’s Director of International Student and Scholar Services.  The NRA must provide proper documentation including but not limited to, Passport, U.S. Social Security Number,visa type that permits employment, and proper authorization such as I20 or DS2019. NRA employees must have a U.S. Social Security Number before their tax documents can be filed with the IRS. If the NRA does not have a U.S. Social Security Number, he/she should go to the local Social Security Office and complete a Form SS-5 (Application for a Social Security Card). It will be necessary to have documentation to indicate that they will be employed at the university. This is usually in the form of a letter from the employing department. Before going to the Social Security Office, it is required Office that the International Education and Development Office’s Director of International Student and Scholar Services be contacted to assist with questions and proper documentation.

Since most of the tax documents are completed and filed for a specific calendar year, all NRA employees are requested to schedule an appointment with the Tax Compliance Officer each year, in January. The purpose for this meeting is to review any changes in the tax status of the employee and to complete tax forms necessary for the new calendar year.

NRA employees are subject to Social Security Tax (FICA TAX). However, they may be exempted from this tax for a specific time period depending upon the visa type they have used to enter the United States.

Wages paid to foreign employees are subject to Federal and State Income Tax unless exempted by special IRS regulations or a tax treaty between the United States and the specific resident country of the employee.  An analysis will be made to determine his/her tax status and to see if any tax treaty benefits are applicable. At that time, required tax forms and documents will be completed, signed, and filed with the appropriate tax offices.

The NRA should plan to provide the following documents:

  • US Social Security Card
  • Passport
  • I-94 (Departure Record)
  • Visa
  • I-20 (Certificate of Eligibility for Nonimmigrant (F-1) Student), or DS-2019 (Certificate of Eligibility for Exchange Visitor (J-1) Status)

After the end of the calendar year, the Payroll Department will issue a Form W-2 (Wage and Tax Statement), if applicable, and/or a Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding) to the NRA which will report the amount of compensation paid and taxes withheld.

Note: If the NRA is from a country that does not have a tax treaty with the United States, compensation will be subject to the graduated withholding rates and the tax calculated based on his/her Form W-4 and Form NC-4.  ASU will send this withheld tax to the IRS and the North Carolina Department of Revenue. The NRA should complete a Form 1040-NR (U.S. Nonresident Alien Income Tax Return) and a NC Form D-400 (Individual Income Tax Return) at year-end. The Form 1040-NR and Form D-400 will determine if the NRA owes additional tax or is entitled to a refund of previously withheld tax. Contact Kay Wood 828-262-6422 for questions concerning U.S. Tax treaties or the forms mentioned above.

Honorarium and Expense Reimbursement Payments to Nonresident Aliens (NRA)
Each department should notify the Office of International Education and Development Office’s Director of International Student and Scholar Services immediately upon deciding to host a non-resident guest. At the time a non-resident guest Lecturer or Researcher is invited to visit ASU to give speeches, conduct workshops, or participate in seminars, he/she should be informed that certain personal information will be required in order for ASU to determine what type payment may be made to them. After notification to the Office of International Education and Development, the University Controller should be notified immediately so that the appropriate Foreign National Information system username and password can be emailed to the foreign visitor as well as to request that he/she provide such information as U.S. Social Security Number or U.S. ITIN (Individual Taxpayer Identification Number); the type visa that will be used to enter the United States; the passport, his/her U.S. tax status and tax treaty benefits being requested.

If the NRA visitor does not have a U.S. Social Security Number and does not obtain one for the visit will be charged 30% federal tax withholding and 6% state withholding.

9-5-6 Rule Regarding Honorarium Payments to Nonresident Alien Visitors on a B-1/B-2 Visa or Visa Waiver: Foreign Visitors present in the United States from a Visa Waiver country or B-1/B-2 Visa, are not permitted to be employed in the United States. Effective October 21, 1998, academic institutions are permitted to pay an individual admitted in B-1/B-2 or Waiver status, "an honorarium payment and associated incidental expenses for a usual academic activity lasting no longer than 9 days at a given institution". This is contingent on the fact that the alien visitor has not accepted such payments or expenses from more than 5 institutions or organizations in the previous 6 month period. The alien must present a valid visa and Form I-94, Record of Arrival and Departure, as verification of status for such payments to be made. The visitor must also sign a statement attesting that his visit at ASU will not exceed 9 days and he/she has not received more than 5 honoraria in last 6 months.

If the NRA is to be paid an honorarium, it is subject to 30% federal tax withholding and 6% state tax withholding. However, some countries have a tax treaty with the U.S., which may exempt the honorarium payment from tax withholding. If treaty benefits are to be requested, a Form 8233, Exemption From Withholding On Compensation For Independent (and Certain Dependent) Personal Services Of A Nonresident Alien Individual, will be completed by the visitor with the assistance of the University Controller at Appalachian State University. If the completed Form 8233 is accepted by ASU, the Director of Payroll is required to send it to the Internal Revenue Service, International Returns section, Bensalem, PA. ASU must wait at least 10 days after sending the form to the IRS before payment may be processed.

If the NRA enters the United States from a Visa Waiver Country or with TN (Trade NAFTA) status, they must present a copy of their I-94. In some instances they may have to request the I-94 at the port of entry if it is not issued by the immigration officer.

At the end of the calendar year, Payroll will issue a Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding) to the NRA which will report the total amount of payments paid to the NRA and taxes withheld by ASU.

Note: If the NRA is from a country that does not have a tax treaty with the United States, a Form 8233 will not be required. The NRA's payment will be subject to 30% federal withholding and 6% state withholding. ASU will send this withheld tax to the IRS, and the NRA should complete a Form 1040-NR (U.S. Nonresident Alien Income Tax Return) at year-end. The Form 1040-NR will determine if the NRA owes additional tax or is entitled to a refund of previously withheld tax. Contact David Jamison 828-262-6426, for questions concerning US Tax treaties or the forms mentioned above. 


Scholarships, Fellowships, and Grants Paid to Nonresident Aliens (NRA)

The portions of a scholarship, fellowship, or grant which are used to pay tuition, fees, books, supplies, or equipment are not taxable under section 117 of the Internal Revenue Code if the recipient is a candidate for a degree. Any portion of the scholarship, fellowship, or grant over and above the five items mentioned above is taxable. For non-degree candidates, the entire grant is taxable.

Each semester the ASU Cashier's Office will notify the University Controller of students who have taxable payments from a scholarship, fellowship, or grant.  The Director will then contact the non-resident alien for the appropriate documentation required to determine the tax rate at which the student will be charged.   The amount of tax to be withheld will be shown and posted to the NRA's student account in the Cashier's Office. If there are questions regarding the taxable amounts or the tax withheld, the NRA should contact David Jamison 828-262-6426.

Any NRA grantee who claims that part or all of his/her scholarship, fellowship, or grant is exempt from taxation because of a tax treaty must file Form W-8BEN with the University Controller. This determination will be made upon meeting with David Jamison and filing the appropriate paperwork.  The NRA must have a U.S. Social Security Number or an Individual Taxpayer Identification Number (ITIN). This number is required so that the University can file the required documents with the appropriate office of the Internal Revenue Service and to other taxing authorities such as the North Carolina Department of Revenue. Also, the number must be used by the NRA when filing annual Income Tax Returns.

The taxable portion of a scholarship, fellowship, or grant and any tax withheld will be reported to the NRA on a Form 1042-S by March 15th of each year. That information will be used by the NRA when filing his/her annual Federal Tax Return (Form 1040-NR).

Please contact David Jamison 828-262-6426 with questions.

FREQUENTLY ASKED QUESTIONS

Who is a nonresident alien? (Green Card Test)
A nonresident alien is an individual who is not a U. S. citizen and does not hold a green card and who has not met the substantial presence test.

The Immigration and Naturalization Service (INS) issues green cards to aliens who have petitioned for residence status. When an alien receives a green card, he/she has obtained the privilege of residing permanently in the U.S. and is now considered a resident alien. A resident alien has all the privileges of a U.S. citizen with two exceptions: 1) A resident alien does not have the privilege to vote. 2) A resident alien is not permitted to serve on jury. For tax purposes a resident alien is viewed the same as a U.S. citizen.

An alien meets the substantial presence test after being present in the U.S. for 183 days over a three-year period. The three-year period must include the current year and the two years immediately preceding. Any period during which an alien is in exempt status does not count toward the accumulation of 183 days. Exempt status most commonly seen in a university environment would be students or teachers present in the U.S. on an "F", "J", "M", or "Q" visa.

What is a visa?
A visa is a stamp on a page in the passport of an alien. The visa allows the passport bearer permission to apply for entry into the U.S. under the conditions specified by the visa type, which the bearer holds.

Examples of information contained on the visa stamp are as follows:

  • Visa Number
  • Visa Type
  • Issue Date
  • Expiration Date
  • Location of the Issuing Office


What is a tax treaty?
The Treasury and State Department negotiate tax treaties between the United States and foreign countries. Both the President and the Senate must approve a treaty. One main purpose of a treaty is to prevent international double taxation. International double taxation occurs when more than one country taxes the same income. Income tax treaties prevent double taxation by allowing a particular type of income to be taxed by either of the countries involved in the treaty.

Not all countries have a tax treaty with the United States. If a nonresident alien, who is a non employee visitor from a country without a tax treaty, is eligible to receive a payment from the university, the payment is subject to withholding at a rate of 30% federal withholding and 6% state withholding. A nonresident alien who is an employee from a country without a tax treaty is subject to the employee graduated tax withholding tables. The tax withholding is calculated based on an employee's Form W-4 and Form NC-4. See Special Instructions For Nonresident Aliens (Form W-4 and Form NC-4) in the Forms section of this guide.

Each treaty the United States negotiates with a country is unique unto itself. Therefore, a general statement cannot be made that a specific type of income is exempt for all nonresident aliens on campus. If a nonresident alien is eligible to receive income from the university, his/her country of residence must first be determined. Then a review of the tax treaty for that country can be made to determine if the type of income in question is exempt. If the income is exempt from withholding due to a tax treaty, the nonresident alien must complete a Form 8233 to apply for the exemption from withholding.

What is a Form 8233?

A nonresident alien completes Form 8233 to apply for a treaty exemption from tax withholding on any income earned in the U.S. Once the University completes the agency part of this form, the Payroll Department must forward it to the Internal Revenue Service, International Returns Section, Bensalem, PA. The exemption does not become effective until ten days after the Form 8233 is mailed to the IRS.

The University cannot issue a check to the alien honoring any tax exemption until the 10 day waiting period has expired. To issue the check before the expiration of the waiting period, the mandatory taxes will be withheld and sent to the IRS. To recover the withheld taxes, the alien must file a U.S. income tax return.

What is a Form I-94?
With few exceptions, all aliens entering the country receive an I-94. The I-94 is an Arrival/Departure Record. The INS keeps the arrival portion. The departure portion is stapled to the passport. The I-94 shows the visa classification, the date of entry, and the length of the stay authorized.

What if an alien is from a country without a tax treaty?
If the NRA is from a country that does not have a tax treaty with the United States, a Form 8233 will not be required. The NRA's payment will be subject to 30% federal withholding and 6% state withholding. ASU will send this withheld tax to the IRS, and the NRA should complete a Form 1040-NR (U.S. Nonresident Alien Income Tax Return) at year-end. The Form 1040-NR will determine if the NRA owes additional tax or is entitled to a refund of previously withheld tax.

Contact David Jamison 828-262-6426, for questions concerning US Tax treaties or the forms mentioned above. 

Each semester the ASU Cashier's Office will notify the University Controller of students who have taxable payments from a scholarship, fellowship, or grant.  The Controller will then contact the non-resident alien for the appropriate documentation required to determine the tax rate at which the student will be charged.   The amount of tax to be withheld will be shown and posted to the NRA's student account in the Cashier's Office. If there are questions regarding the taxable amounts or the tax withheld, the NRA should contact David Jamison 828-262-6426.

The taxable portion of a scholarship, fellowship, or grant and any tax withheld will be reported to the NRA on a Form 1042-S by March 15th of each year. That information will be used by the NRA when filing his/her annual Federal Tax Return (Form 1040-NR). 

Please contact David Jamison 828-262-6426 with questions.

Who needs an identification number?
Any NRA receiving a payment from the University is required to have an identification number.  Those who complete a Form 8233 and apply for a tax treaty exemption are required to have an identification number. The Form 8233 asks for the identification number in Part 1 of the form.

If the NRA is eligible to work in the United States, the law requires that the NRA have a social security number for identification. Application for a social security number is done on Form SS-5, which is filed with the Social Security Office.

If the NRA is not eligible to work in the United States, the IRS requires the NRA to apply for an ITIN. To receive an ITIN the alien applies with the IRS. A Form W-7 is completed to apply for the ITIN.

Note: If you have questions please contact David Jamison 828-262-6426 or via email at jamisondt@appstate.edu.

REFERENCES:

  • IRS Publication 515 - Withholding of Tax on Nonresident Aliens and Foreign Corporations.
  • IRS Publication 519 - U.S. Tax Guide for Aliens
  • IRS Publication 597 - Information on the United States - Canada Income Tax Treaty.
  • IRS Publication 901 - U.S. Tax Treaties.

For additional instructions and/or clarification, please visit the web site of the Office of International Education and Development (OIED) at http://international.appstate.edu/