Policies and Procedures for

Payments to Nonresident Aliens

 

 

 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction

 

This document provides policies and procedures necessary for payments to nonresident aliens for services provided to Smith College as an independent contractor and/or travel reimbursements to contractors and other foreign visitors.  A nonresident alien independent contractor is a foreign visitor who provides a service to Smith College but is not an employee.  An example of this type of payment is an honorarium paid to a foreign scholar who temporarily visits the U.S. to deliver a one-day lecture.

 

Payments to current Smith College Foreign Faculty, Staff and Students have very specific requirements.  Please refer to that section in this document.

 

The United States Bureau of Citizenship and Immigration Services (BCIS), formally the INS, and the Internal Revenue Service (IRS) restrict the College's ability to make payments to nonresident aliens.  To ensure prompt payments to foreign visitors, your cooperation is essential.

 

Although the immigration laws of the United States speak of immigrants, nonimmigrants, and illegal aliens, the tax laws of the United States speak only of RESIDENT ALIENS and NONRESIDENT ALIENS.  The general controlling principle is that RESIDENT ALIENS are taxed in the same manner as U.S. citizens, and NONRESIDENT ALIENS are taxed according to special rules contained in certain parts of the Internal Revenue Code (hereinafter referred to as the Code).  Under the tax residency rules of the Code, any alien who is not a RESIDENT ALIEN must be a NONRESIDENT ALIEN.  An alien will become a RESIDENT ALIEN in one of three ways: (1) by being lawfully admitted to the United States for permanent residence under the immigration laws (the Green Card test); (2) by passing the Substantial Presence Test (which is a numerical formula which measures days of presence in the United States); or (3) by making what is called the "First Year Election" (a numerical formula under which an alien may pass the substantial presence test one year earlier than under the normal rules).   Therefore, it is very important that this determination be made prior to issuing payments to foreign visitors.

 

Generally, payments made to nonresident independent contractors are subject to a withholding tax of 30%, unless a tax treaty exists between the U.S. and the country of citizenship of the nonresident alien.

 

Individuals who are not U.S. citizens or permanent residents and who seek to enter the U.S. to work, study or visit must be in an appropriate "visa status".  The type of status a person is in determines if and how the College can make payments to him/her.  Each time a foreign person is paid by the College, a Foreign National Information Form (FNIF) and Form W-8BEN must be completed or updated.

 

The Controller's Office uses nonresident alien tax compliance software to generate many forms based on information provided by the visitor, including specific representations required by the applicable income tax treaty. By law, the institutions must submit Form 8233 to the IRS at least ten (10) days prior to the date of payment; thus, payment will be delayed if the Form is not correctly completed in advance of that time period.

 

Smith College requires the visitor to obtain a U.S. taxpayer identification number for all honoraria and taxable reimbursement payments.

 

Timely completion of all forms is necessary to ensure prompt payment to your foreign visitor and no unnecessary withholding tax deducted.

 

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Payments to Nonresident Aliens for Services

Performed Outside the United States

 

 

 

If the nonresident alien does not enter the United States , they are not required to have a social security number or individual tax identification number to receive payment.  The payment is not reportable to the IRS.

 

The following forms must be completed and forwarded to Accounts Payable:

 

Accounts Payable Voucher Form.  Please state on the form "All work associated with this payment request was performed outside the U.S. "

Form W-8BEN, Certificate of Foreign Status completed by the nonresident alien.

 

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Payments to Nonresident Aliens for

Services Performed in the United States

 

VISA STATUS - In order to process a payment to a nonresident alien visitor, the individual must be in a visa status that allows Smith College to issue payment. Please contact the International Students Office at least 6 weeks before a visitor is to arrive from abroad or 3 weeks before his/her arrival on campus if he/she is already in the United States. When you call, please have information about where the individual is coming from, his/her country of citizenship and if he/she is already in the United States , the visa status granted at entry to the U.S.

 

DETERMINE THE TYPE OF PAYMENT - You must determine which of the following two categories the nonresident alien visitor will be paid under and use the appropriate documents and forms.

Reimbursement only - must have proper visa status, a social security number (SSN) or individual tax identification number (ITIN) is not required if original receipts are submitted. The visitor must complete a Foreign National Information Form (FNIF) and a Form W-8BEN.

Contract for service (Honorarium) - must have proper visa status, a social security number (SSN) or individual tax identification number (ITIN) is required. The visitor must complete a FNIF and a W-8BEN. 30% federal tax will be withheld from their payment, unless an exception is applied for (tax treaty).

 

U.S TAXPAYER IDENTIFICATION NUMBERS - A U.S. taxpayer identification number is required in order to receive payment.  The IRS has designated Smith College as a Certifying Acceptance Agent. If your visitor would like to apply for an ITIN, he/she may make an appointment for an interview with the Payroll & Disbursements Office. Your visitor must have his/her passport available at the interview or a valid document issued by the U.S. BCIS in accordance with that agency's regulations or a foreign birth record. The foreign visitor will be required to complete Form W-7 and a certification letter. To qualify for an ITIN, the foreign visitor must not be eligible to obtain a social security number.

 

VISITORS FROM A TAX TREATY COUNTRY - If the nonresident alien visitor is from a country that has a tax treaty with the United States , he/she may take advantage of the tax treaty benefits.  A Form 8233 must be completed with the Payroll & Disbursements Office. The individual must have a SSN or ITIN at the time of processing the Form 8233.  The visitor must complete all documentation early to allow sufficient time for IRS approval. The IRS requires 10 business days to reject the Form 8233.  Payment will not be issued until after the 10-day period.  The Payroll and Disbursements Office can assist in the preparation of Form 8233 once the Foreign National Information Form has been completed. Please note that the Form 8233 must be filed with the IRS in the same year in which the service was performed; otherwise Smith College must withhold 30% federal tax. There are no exceptions.

 

UPON ARRIVIAL OF THE VISITOR - The visitor should come to the Payroll & Disbursements Office to present forms and documentation.  If the visitor comes to campus when the Payroll & Disbursements Office is closed, please obtain a copy of the visitors passport (data page), visa page and one of the following documents:

 

  • Form I-94 Departure Record
  • If F-1 visa, Form I-20 Certificate of Eligibility of Nonimmigrant Student Status or Form I-688B Employment Authorization Document
  • If J-1 visa, Form DS2019 Certificate of Eligibility for Exchange Visitor

 

6. FORWARD COMPLETED PAPERWORK TO ACCOUNTS PAYABLE  - Once your visitor completes all relevant paperwork, the originals must be sent to the Payroll & Disbursements Office. In order to ensure timely payment, Accounts Payable must receive proper and complete forms as soon as possible.

 

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Payments to Smith College Foreign Faculty, Staff and Students

 

 

 

 

FACULTY AND STAFF

 

Non-taxable expense reimbursements related to Smith College travel may be submitted to accounts payable.  Please refer to the College's Travel and Entertainment Policy.  All other payments must be paid through payroll.  Please contact the Payroll and Disbursements Office if you are unclear about how to process a payment to a current foreign faculty or staff employee.

 

STUDENTS

 

There are very specific rules and regulations regarding payments to foreign students.  Scholarship, grant and fellowship type payments are generally subject to 14% federal tax withholding.  Although these payments are paid through accounts payable, the payment must be analyzed in order to determine the tax withholding requirements.  Please contact the Payroll and Disbursements Office if you are unclear about how to process a payment to a current foreign student.

 

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CHECKLIST FOR HONORARIA PAYMENTS

(Printable Version)

 

_____ 1. Prior to projected date of arrival, contact the International Students Office to determine what is necessary to assure that immigration regulations are satisfied.
____ 2. Prior to arrival at Smith College
, have your foreign visitor complete a Form W-8BEN and a Foreign National Information Form (FNIF).
____ 3. Confirm your foreign visitor has a valid U.S. Social Security number or U.S. individual tax identification number. If he/she doesn’t have one, he/she must obtain or apply for one before payment will be issued.
____ 4. If your foreign visitor does not have a U.S. Social Security number or U.S. individual tax identification number, he/she may try to obtain one while here.
____ 5. If your foreign visitor is from a tax treaty country, he/she may complete Form 8233 to take advantage of the treaty. Otherwise he/she will be subject to a 30% withholding tax.  He/she must have a U.S. social security number or U.S. individual taxpayer identification number before completing treaty forms.
____ 6. When your foreign visitor arrives, make a photocopy of his/her Form I-94, passport and visa page (if applicable).
____ 7. Forward all documents to the Accounts Payable Office at least 10 business days before payment is required. Include the name of a contact person within that department to whom questions can be directed.

 

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CHECKLIST FOR REIMBURSEMENT PAYMENTS

(Printable Version)

 

_____ 1. Prior to projected date of arrival, contact the International Students Office to determine what is necessary to assure that immigration regulations are satisfied.
____ 2. Prior to arrival at Smith College
, have your foreign visitor complete a Form W-8BEN and a Foreign National Information Form (FNIF).
____ 3. Confirm your foreign visitor has a valid U.S. Social Security number or U.S. individual tax identification number.  Expenses for which your foreign visitor can supply original receipts are not subject to the 30% withholding tax.  Taxable expenses require that the individual obtain a U.S. taxpayer identification number.
____ 4. If your foreign visitor does not have a U.S. Social Security number or U.S. individual tax identification number, he/she may try to obtain one while here.
____ 5. When your foreign visitor arrives, make a photocopy of his/her Form I-94, passport and visa page (if applicable).
____ 6. Forward all documents to the Accounts Payable Office at least 10 business days before payment is required. Include the name of a contact person within that department to whom questions can be directed.

 

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Frequent Visa Types

 

 

Immigration                                                          Honorarium                Other           Travel

     Status          Description                                  Allowed?                   Reimbursements            Reimbursements

 

 

A-1/A-2            Diplomats & foreign

                        Government Officials                    Rarely                       NO              YES

 

B-1                   Visitor for Business                      *see restrictions

                                                                           Below                        YES             YES

 

B-2                   Visitor for pleasure                       *see restrictions        

Below                                                                  YES                          YES

 

F-1                   Students                                       On campus-inherent   YES             YES

                        In status; off campus

                        With INS authorization

                        Only

 

F-2                   Dependent of F-1                         NEVER                     NEVER       NO

 

 

G-1/G-3            Employees of international

     &                organizations                                Rarely                       NO              YES

Dependents

 

H-1B                Worker in a specialty

                        Occupation                                  Yes, for specific

                                                                           Employer only            YES             YES

 

J-1                    Exchange visitors including

                        Students, scholars and

                        Trainees                                      Yes, with employer

                                                                           Specific permission     YES             YES

 

J-2                    Dependent of J-1                          Yes, with employer

                                                                           Specific permission

                                                                           And EAD                  YES             YES

 

 

WB                  Alien treated as a B-1                   **see restrictions below                 YES          YES

                                                                           Visitor for payment

                                                                           Purposes admitted without

                                                                           A visa under the visa waiver

                                                                           Program                   

 

WT                  Alien treated as a B-2                   **see restrictions below                 YES          YES

                                                                           Visitor for payment

                                                                           Purposes admitted without

                                                                           A visa under the visa waiver

                                                                           Program                   

 

TN                   Used by Canadian and Mexican    YES                          YES             YES

                        Residents under NAFTA, issued

                        In lieu of H-1 visa or other work

                        Authorized status

 

 

** There is a limit on the period of stay ( not to exceed 9 days per institution) as well as on the number of times honoraria can be paid to an individual (not to exceed 6 visits in 6 months).  There is not a limit on the dollar amount which can be paid and reimbursements/travel expenses may also be paid; limits also do not exist on the total of honoraria paid or on the total number of times institutions host visitors for business and pleasure.

 

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Tax Treaty Countries for Independent Personal Services

 

                                            Maximum                  Maximum amount of

Country                              Presence in US                 Compensation                  Treaty Article  

 

Australia                             183 Days                               No Limit                            14

 

Austria                                No Limit                                No Limit                            14

 

Barbados                            89 Days                                 $5,000 P.A.                       14

 

Belgium                              182 Days                               No Limit                            14(2)(a)(b)

 

Canada                               No Limit                                No Limit                            XIV

 

China , People’s Rep. Of     183 Days                               No Limit                            13

 

Commonwealth of

Independent States:             183 Days                               No Limit                            VI(2)

Armenia

Azerbaijan

Belarus

Georgia

Kyrgyzstan

Moldova

Tajikistan

Turkmenistan

Uzbekistan

 

Cyprus                                182 Days                               No Limit                            17

 

Czech Republic                    183 Days                               No Limit                            14

 

Denmark                             No Limit                                No Limit                            14

 

Estonia                                183 Days                               No Limit                            14

 

Finland                                No Limit                                No Limit                            14

 

France                                No Limit                                No Limit                            14

 

Germany                             No Limit                                No Limit                            14

 

Greece                                183 Days                               $10,000                             X

 

Hungary                              183 Days                               No Limit                            13

 

Iceland                                182 Days                               No Limit                            18

 

India                                   89 Days                                 No Limit                            15

 

Indonesia                            119 Days                               No Limit                            15

 

Ireland                                No Limit                                No Limit                            14

 

Israel                                  182 Days                               No Limit                            16

 

Italy                                    183 Days                               No Limit                            14

 

Jamaica                              89 Days                                 $5,000 P.A.                       14

 

Japan                                  183 Days                               No Limit                            17

 

Kazakstan                           183 Days                               No Limit                            14

 

Korea, Rep. Of                   182 Days                               $3,000 P.A.                       18

 

Latvia                                 183 Days                               No Limit                            14

 

Lithuania                             183 Days                               No Limit                            14

 

Luxembourg                        No Limit                                No Limit                            15

 

Mexico                               183 Days                               No Limit                            14

 

Morocco                             182 Days                               $5,000                               14

 

Netherlands                         No Limit                                No Limit                            15

 

New Zealand                      183 Days                               No Limit                            14

 

Norway                              182 Days                               No Limit                            13

 

Philippines                           89 Days                                 $10,000 P.A.                     15

 

Poland                                182 Days                               No Limit                            15

 

Portugal                              182 Days                               No Limit                            15

 

Romania                             182 Days                               No Limit                            14

 

Russia                                 183 Days                               No Limit                            13

 

Slovak Republic                   183 Days                               No Limit                            14

 

Slovenia                              No Limit                                No Limit                            14

 

South Africa                        183 Days                               No Limit                            14

 

Spain                                  No Limit                                No Limit                            15

 

Sweden                               No Limit                                No Limit                            14

 

Switzerland                         No Limit                                No Limit                            14

 

Thailand                              89 Days                                 $10,000                             15

 

Trinidad & Tobago              183 Days                               $3,000                               17

 

Tunisia                                183 Days                               $7,500 p.a.                         14

 

Turkey                                183 Days                               No Limit                            14

 

Ukraine                               No Limit                                No Limit                            14

 

United Kingdom                  183 Days                               No Limit                            14

 

Venezuela                           No Limit                                No Limit                            14

 

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Common Terms and Definitions

 

 

NONRESIDENT ALIEN (Foreign Visitor)

 

A nonresident alien is an individual who is not a United States Citizen or a resident alien.  For federal tax purposes, individuals are generally taxed as nonresident aliens if they do not fall into one of the following categories:

 

  • United States Citizen
  • United States Resident with a Green Card
  • Individual without a Green Card who meets the physical presence test. (see definition below)

 

VISA

 

A visa is a permit to apply to enter the United States . If needed, it is normally obtained at an American consulate outside the United States . It classifies the visit as business, tourism, etc. and is usually valid for multiple visits to the United States during a specified period of time.

 

A nonimmigrant visa is given to someone who lives in another country and wishes to come temporarily to the United States for a specific purpose. Nonimmigrant visas are given to people such as tourists, business people, students, temporary workers, and diplomats.

 

 

VISA WAIVER PROGRAM

 

The visa waiver program enables citizens of participating countries to travel to the U.S. for tourism or business for 90 days or less without obtaining a U.S. visa.

 

ARRIVAL/DEPARTURE RECORD (I-94)

 

Once you receive a nonimmigrant visa, you are authorized to travel to the United States . However, a visa does not guarantee that you will be allowed to enter the United States . Immigration has authority to grant or deny your admission to the United States and to determine how long you may stay in the United States .

 

An Arrival/Departure Record is created by the BCIS when the traveler is inspected upon arrival in the United States . The inspector endorses the Form I-94 (Arrival/Departure Record) with the date, place of arrival the "class of admission" (which corresponds to the visa class), the length of time the traveler may remain in the United States , and any special conditions which may apply to the visit. The inspector keeps the Arrival portion of the form and returns the endorsed departure portion to the traveler who must keep the card in his possession until he leaves the United States . When the traveler leaves the United States , he must surrender the departure portion of the I-94 to the airline representative, if he travels by air, or to the immigration or customs officer if he departs across the border to Canada or Mexico .

 

FOREIGN NATIONAL INFORMATION FORM (FNIF)

 

All nonresident aliens paid by the College must complete the FNIF.  The information will allow the College to determine the U.S. residency for tax purposes and is not associated with immigration or visa classification.

 

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List of Contacts for Assistance

 

 

Smith College

Payroll & Disbursements Office

College Hall #204

Northampton , MA   01063

 

Honey Gillman                                                              (413)-585-2229

Payroll & Disbursements Assistant                                                                     hgillman@smith.edu

 

Donna Kortes                                                               (413)-585-2213

Payroll & Disbursements Assistant                                 dkortes@smith.edu

 

Trish Rockett                                                                (413)-585-2227

Payroll & Disbursements Manager                                 prockett@smith.edu

 

Smith College

International Students Office

Clark Hall 305

Northampton , MA   01063

 

Barbara MacDonald                                                      (413)-585-4943

Administrative Assistant                                                bmacdona@smith.edu

 

Hrayr Tamzarian                                                           (413)-585-4943

Associate Dean for International Students                       htamzari@smith.edu

 

 

Other Help Available

 

Internal Revenue Service (IRS)

http://www.irs.gov

IRS Customer Service (International) tel.  (215)-516-2000

IRS Foreign Payments Team tel.                (202)-874-1800

 

The Social Security Administration (SSA)

http://www.ssa.gov

tel. (800)-772-1213

Office of International.Operations, Social Security Administration tel. (410)-965-3564

 

The Department of State

http://www.state.gov

 

The Bureau of Citizenship and Immigration Services (BCIS) (formally INS)

http://www.bcis.gov

 

BCIS customer service tel. (800)-375-5283

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