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UPPS 03.04.06 - Nonresident Alien - Honorarium and Contracted Services Payments

Nonresident Alien - Honorarium and Contracted Services Payments

UPPS No. 03.04.06
Issue No. 5
Effective Date: 5/29/2018
Next Review Date: 1/01/2020 (E2Y)
Sr. Reviewer: Director, Payroll and Tax Compliance

  1. POLICY STATEMENTS

    1. This document establishes responsibility and policy regarding the payment to a nonresident alien (NRA) contractor or business entity for services performed within the United States.

    2. This document also ensures that policy conforms to the United States Internal Revenue Code (IRC) and meets "Eligibility for Payment Rules" set by the United States Citizenship and Immigration Services.

  2. DEFINITIONS

    1. Taxpayer Identification Number (TIN) – includes one of the following: a social security number, individual taxpayer identification number, or an employer identification number.

    2. Nonresident Alien – as set forth in IRC §7701(b), is an alien who has neither a substantial presence in the United States, a green card, nor a permanent residence in the United States.

    3. Nonresident Alien Contractor – an independent contractor who does not have an employee-employer relationship with Texas State University, nor has been offered employment at Texas State, and is an individual or entity working on a contracted and temporary basis.

    4. 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.

  3. PROCEDURE FOR PREPARING FOR THE NRA’S VISIT TO THE UNITED STATES (NON-EMPLOYED CONTRACTOR)

    1. The account manager must discuss the visa requirements with the International Office and the Procurement and Strategic Sourcing Office at least 45 days in advance of the NRA arriving on campus. The NRA must obtain the appropriate type of visa that allows them to be compensated within the United States and provide the following documents prior to performing services for the university.

      The following documents are required and can be found in the Foreign Vendor Packet:

      1. IRS W8-BEN or W8-BEN-E for Entities;

      2. Foreign National Information Form (Form #FS-05); and

      3. a copy of visa or passport for individuals (not part of the Foreign Vendor packet but is a requirement).

  4. PROCEDURE FOR APPLYING FOR A TIN FOR AN NRA

    1. 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). If unsure of requirement, refer to applicable form instructions (Individual – W8-BEN; Entity W8BEN-E).
  5. PROCEDURES FOR WITHHOLDING TAX FROM PAYMENT TO NRA

    1. The university will withhold federal tax from the NRA’s compensation at the rate of 30 percent, unless otherwise provided by federal law or an applicable tax treaty.

    2. The Payroll and Tax Compliance Office will discuss the tax withholding requirements with the account manager. The account manager may gross up the amount the NRA is paid so the net payment equals the original amount to which was agreed.

    3. The Payroll and Tax Compliance Office 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.

    4. The university is responsible for withholding income tax when applicable and submitting payment to the IRS immediately following payment to the NRA.

    5. 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.

  6. REVIEWERS OF THIS UPPS

    1. Reviewers of this UPPS include the following:

      Position Date
      Director, Payroll and Tax Compliance January 1 E2Y
      Director, Procurement and Strategic Sourcing January 1 E2Y
  7. 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, Payroll and Tax Compliance; senior reviewer of this UPPS

    Associate Vice President for Financial Services

    Vice President for Finance and Support Services

    President