Western Carolina University has many foreign national visitors, employees and students each year. Payments to a foreign national can be very complicated due to tax laws and regulations. It is strongly recommended that you contact the Controller’s Office before making any payments to a foreign national. The taxability of payments made to nonresident aliens (NRA) depends on various immigration and tax treaty factors. An NRA’s visa is one of the first criteria to examine to determine whether or not a payment can be made to the NRA, and if so, the taxability of that payment to that person. There are many different types of visas, but the following list contains the most frequently encountered visas:
All employees, temporary employees, and student employees are paid through the University payroll office. Any withholding rates will vary depending on individual circumstances. Contact the Payroll Department in Human Resources with any questions regarding payroll withholding rates or any payroll related issues. Please review Foreign National Information Form.
Payments made to any other NRA’s are typically paid through the University’s A/P office and must be approved by the Controller’s Office. Most of these payments are for individual personal services, honorariums, or travel reimbursements. The appropriate forms must be filled out and submitted before payment can be processed. If you have further questions about these types of payments or the forms needed for payment, you can contact the Controller’s Office. These types of payments to foreign nationals will be reported on Form 1042-S (NOT Form 1099). Any questions concerning scholarships to foreign national students should be directed to the Bursar in the Controller’s Office.
Individual Personal Services, also known as Independent Contractor payments, can also be paid to NRAs. If the services provided by the NRA were performed in the United States, then it is considered income from U. S. Sources and subject to tax withholding and reporting to the IRS. If the services provided by the NRA were performed outside the United States, then it is not considered income from U. S. sources and is not subject to tax withholding or IRS reporting. The location where the services were performed determines the source of the income. It does NOT matter where the contract was made, the place of payment, or the residence of the payer. The University must generally withhold tax at the standard IRS rate of 30% on compensation paid to an NRA for individual personal services performed, unless a tax treaty benefit applies. The NRA will also be subject to N.C. 4% withholding tax on any payment over $1,500.00 if applicable. This type of service also includes honorarium paid by colleges and universities to visiting teachers, lecturers, and researchers. Both individual personal services and honorarium payments are also governed by the 9/5/6 rule. This rule limits the length of stay by the NRA to nine days. Services by the NRA are limited to five U.S. businesses during a six month period.
If an NRA wants to claim a treaty benefit exemption from withholding, or reduced withholding of taxes, if permitted by the tax treaty with the NRA’s country, the NRA should contact the Controller’s Office to complete a Form 8233. If the person is an NRA and a University Employee, then set up an appointment with the Payroll Department in Human Resources because the forms are computer generated. A valid U.S. social security number or a U.S. individual taxpayer identification number (ITIN) is required in order to use this form for a tax withholding treaty exemption. Any tax treaty a country has with the U.S., if applicable, will only exempt or reduce tax withholding on payments received in the U.S. The NRA must also provide a copy of his/her visa or I-94. Please note that a valid U.S. Tax ID number is REQUIRED to claim tax treaty benefits. Without form 8233 being filed, all required taxes must be withheld from all payments.
Generally, an NRA can be reimbursed for travel expenses if the payments are made under the accountable plan (in accordance with the University’s travel policy) and are for business purposes. The NRA will need to submit all original travel receipts, i.e. airline tickets, train tickets, etc., or the NRA will not be reimbursed. Most payments for travel expenses are not reportable to the IRS and are not subject to NRA withholding taxes. Although the University may not be paying the NRA an honorarium, the NRA must qualify to receive an honorarium in order to receive a travel reimbursement if the NRA is on any visa type other than B-1 or B-2.
Please contact the Bursar in the Controller’s Office for reporting issues of scholarships awarded to NRA students. Portions of scholarship payments to NRA students may be required to be reported on form 1042-S annually.
Non-Payroll Payments to Foreign Individuals
Requests with all original travel expense documents attached should be forwarded to the Controller’s Office for review before final processing.
Below is a list of helpful documents/information needed before paying a NRA: