Nonresident Alien – Honorarium and Contracted UPPS No. 03.04.06
Services Payments Issue No. 1
Effective Date: 02/20/2009
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. DEFINITIONS
02.01 A taxpayer identification number (TIN) is one
of the following: a social security number, an 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 at least 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 will provide the NRA with
the following forms for completion:
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 with photograph not expired
or older than three years; and
b. A visa, unless the NRA is from a Visa Waiver
Program country.
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 account manager must discuss the tax withholding
requirements with the tax specialist to clarify the payment manner. 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 submit the withheld
income tax to the IRS and will send IRS 1042-S forms (Foreign Person's U.S.
Source Income Subject to Withholding) to each NRA and to the IRS at the end of
each tax year.
06. REVIEWERS OF THIS UPPS
06.01 Reviewers of this UPPS include the following:
Position Date
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
President