Nonresident Alien – Honorarium and UPPS No. 03.04.06
Contracted Services Payments Issue No. 2
Effective Date: 05/11/2011
Review: January 1 E2Y
01. POLICY STATEMENTS
01.01 This UPPS establishes responsibility and policy regarding the payment to a nonresident alien contractor (NRA) or business entity for services performed within the United States.
01.02 This UPPS also ensures that policy conforms to U.S. Internal Revenue Code and meets “Eligibility for Payment Rules” set by the U.S. Citizenship and Immigration Services.
02.01 A taxpayer identification number (TIN) is one of the following: a social security number, individual taxpayer identification number (ITIN), or an employer identification number.
02.02 A nonresident alien, as set forth in IRC
§7701(b), is an alien who has neither a substantial presence in the United
States, nor a green card, nor a permanent residence in the United States.
02.03 A nonresident alien contractor does not have
an employee-employer relationship with Texas State, has not been offered
employment at Texas State, and is working on a contracted and temporary basis.
02.04 A tax treaty exemption provides a federal tax withholding exemption for aliens from countries who have tax treaties with the United States. However, the Internal Revenue Service (IRS) imposes restrictions on the application of the tax treaty exemption.
03. PROCEDURE FOR PREPARING FOR THE NRA’S VISIT TO THE U.S.
03.01 The account manager of the hosting department must provide a letter of invitation from Texas State to the NRA, which must include the wording that the NRA has not been offered employment by Texas State, but is only providing temporary services to Texas State. The account manager must send a copy of this letter of invitation to the tax specialist.
03.02 The account manager must discuss the visa requirements with the International Office or the tax specialist before the NRA enters the U.S. The NRA must obtain the type of visa that allows the NRA to receive compensation in the United States.
03.03 The account manager must notify the tax specialist of the NRA’s campus visit one to two months prior to the visit and provide the following information:
a. NRA’s country of residence;
b. Whether or not the NRA has a TIN;
c. The dates of the NRA’s visit to Texas State
and length of stay; and
d. The amount and nature of payment (honorarium, expenses, etc.).
04. PROCEDURE FOR APPLYING FOR A TAXPAYER IDENTIFICATION NUMBER FOR AN NRA
04.01 The NRA, either an individual or a business entity, who provides services for compensation in the United States for Texas State must have a TIN (see Section 02.01).
04.02 The tax specialist at Texas State, as an IRS-certifying acceptance agent, can assist the NRA to apply for an ITIN if the NRA is ineligible for a social security number and an ITIN has not been issued to the NRA for a prior visit to the United States.
04.03 The tax specialist may provide the NRA with the following forms for completion, if applicable:
a. Foreign National Information form, which
requires a foreign address.
b. IRS Form W7 – Application for IRS Individual Taxpayer Identification Number is
completed by the NRA to apply for an ITIN.
c. IRS Form 8233 – Exemption From Withholding on Compensation for Independent Personal Services of a NRA, the application for Tax Treaty Exemption.
04.04 The NRA must meet with the tax specialist while on campus and must provide the following to the tax specialist:
a. An original passport not expired, with photograph;
b. A visa, unless the NRA is from a Visa Waiver Program country. For example, visa types are B-1/B-2, O-1, J-1 with DS-2019, F-1 OPT with valid EAD card; and
c. An I-94 card.
05. PROCEDURE FOR WITHHOLDING TAX FROM PAYMENT TO NRA
05.01 The tax specialist will withhold federal tax from the NRA’s compensation at the rate of 30%, unless otherwise provided by federal law or an applicable tax treaty.
05.02 The tax specialist must discuss the tax withholding requirements with the account manager. The department may increase the amount the NRA is paid so the net payment equals the original amount intended.
05.03 The tax specialist will send IRS 1042-S forms (Foreign Person's U.S. Source Income Subject to Withholding) to each NRA and submit the report to the IRS at the end of each tax year by the IRS deadlines.
05.04 The tax specialist is responsible for withholding income tax when applicable and submitting payment to the IRS immediately following the payment to the NRA.
05.05 The NRA contractor is responsible for filing an IRS 1040NR or 1040NR-EZ form either claiming their treaty exemption or requesting an income tax refund according to applicable IRS regulations.
06. REVIEWERS OF THIS UPPS
06.01 Reviewers of this UPPS include the following:
Director, Payroll and Tax Compliance January 1 E2Y
Tax Specialist January 1 E2Y
07. CERTIFICATION STATEMENT
This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.
Director of Payroll and Tax Compliance; senior reviewer of this UPPS
Associate Vice President for Financial Services
Vice President for Finance and Support Services