Payments to Nonresident Aliens
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.
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.
Definition of Nonresident Aliens
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 percent, 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 or her.
Nonresident Alien Tax Compliance
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 10 days prior to the date of payment. Payment will be delayed if the form is not correctly completed in advance of that time period.
Reimbursement only: Expenses for which your foreign visitor can supply original receipts are not subject to the 30 percent withholding tax.
Contract for service (Honorarium): Expenses are subject to a 30 percent withholding tax, unless from a tax treaty contry.
U.S. Taxpayer Identification Numbers
Smith College requires the visitor to obtain a U.S. taxpayer identification number for all honoraria and taxable reimbursement payments. 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 percent federal tax. There are no exceptions.
Payments for Services Performed In the United States
Prior to Arrival
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 six weeks before a visitor is to arrive from abroad or three 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 United States.
Upon Arrival of the Visitor
Make a photocopy of his/her Form I-94, passport and visa page (if applicable).
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
- If J-1 visa: Form DS-2019 Certificate of Eligibility for Exchange Visitor
Forward all documents to the accounts payable office at least 10 business days before payment is required.
Each time a foreign person is paid by the college, a Foreign National Information Form and Form W-8BEN must be completed or updated.
Once your visitor completes all relevant paperwork, the originals must be sent to the payroll & disbursements office. Include the name of a contact person within that department to whom questions can be directed. In order to ensure timely payment, Accounts Payable must receive proper and complete forms as soon as possible.
Payments 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:
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.
Travel & Entertainment Policy for Nonresident Aliens
All payments involving non-U.S. citizens must be approved by the Payroll and Disbursements Office and must include a social security number or an individual tax identification number (ITIN). Visiting foreign scholars, nonresident alien contractors, nonresident alien employees and others performing personal services must submit the general documentation required by this policy along with the additional forms required under the next paragraph. Under no circumstances should an agreement or document be signed unless the payee's status is determined for tax and other regulatory purposes.
If reimbursement is being requested (via check, wire, or other means) and receipts (converted into U.S. currency), approvals, etc., are adequate, withholding will not be required (i.e., the business-related reimbursement income will not be treated as taxable).
If a department desires to make a payment directly to a third party, such as to a travel agency, airline, hotel, credit card company, etc. on behalf of a nonresident alien, prepayment approval from the Payroll and Disbursements Office must be obtained.
Payments to Foreign Students
There are very specific rules and regulations regarding payments to foreign students. Scholarship, grant and fellowship type payments are generally subject to 14 percent 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.
The Office for International Students and Scholars serves the needs of all international faculty regularly employed at Smith College and visiting faculty who are here for a semester or shorter.