Our department wants to bring an international person to campus to speak to a class. Where would we get assistance to ensure that the arrangements and paperwork are in order to process a payment to the individual?
If payment or reimbursement of expenses to the international guest (non-U.S. citizen) is anticipated, and the individual has not been hired through an employment office, you need to contact Kim Wagester in the Payroll/Travel office, at 7388, prior to the visit to ensure the eligibility of any payment or reimbursement.
Are payments to all international visitors handled the same way?
No. International visitors have both an immigration status governed by the U.S. Citizenship and Immigration Services (USCIS), and a tax status governed by the U.S. Internal Revenue Service (IRS).
USCIS status is generally either “non-immigrant” or “immigrant”. A “non-immigrant” is an international visitor to whom the USCIS has given permission to reside temporarily in the United States. Generally, a non-immigrant has expressed to the USCIS that he/she is a permanent resident of a foreign country to which he/she intends to return to after a temporary stay in the U.S. The IRS generally refers to these individuals as “non-resident aliens” (NRA). In order to enter the U.S. a NRA must have a visa issued by the U.S. Department of State giving him/her certain limited permissions while in the U.S. Some visas permit limited payment to the NRA. (Canadians may not be issued a visa prior to visiting the U.S.; however, they will still need a validated USCIS Form I-94 if payment is to be issued to them. (See FAQ “What is a USCIS Form I-94 below.) Payments to qualified NRA (i.e., eligible to receive payment from CMU) are generally subject to U.S. income tax withholding unless he/she qualifies for exemption from withholding under tax treaty benefits or some other exemption.
An “immigrant” is an alien who has the right to reside permanently in the United States. Eventually, these aliens can earn a “green card” (USCIS Form I-551). A green card is valid proof of immigrant status. The IRS refers to these individuals as “resident aliens”. Resident aliens do not need a visa and are paid in the same manner as U.S. citizens.
What is a U.S. Citizenship and Immigration Services (USCIS) Form I-94 "Arrival-Departure Record"?
A Form I-94 ‘Arrival-Departure Record” is generated by the USCIS when the foreign traveler is inspected upon arrival in the U.S. The inspector records on the I-94 the following information: date and place of arrival; the “class of admission” – which is the same as the visa class; the length of time the foreign traveler may remain in the U.S.; and any special conditions which may apply to the visit. Information provided on Form I-94 aids in determining if a non-U.S. citizen (non-resident alien) is eligible to receive payment from CMU.
What is a visa?
A visa stamp is written evidence that a non-immigrant / NRA has been granted permission to enter the U.S. by the U.S. Department of State. Typically, the visa status is recorded in the form of a stamp on one of the pages of the individual’s passport. Visa status’ come in different categories and give the non-immigrant / NRA different permissions and limits while temporarily in the U.S. For information on some of the different visa categories, and other non-resident alien information visit Payroll Accounting
What is a U.S. taxpayer identification number?
A U.S. taxpayer identification number (TIN) is used to identify an individual who is required to report income and/or pay taxes to the U.S. federal government. In order for a non-resident alien (NRA) to qualify for exemption from income tax withholding, their U.S. TIN must be provided with the documentation submitted to apply for exemption. A U.S. TIN can be one of several different forms:
ITIN : U.S. Individual Tax Identification Number. This number is issued to NRA individuals who need a tax identification number, but did not enter the U.S. under a visa status that authorizes employment. For example an “F” or “J” visa may authorize employment, whereas, a “B” visa does not authorize employment. An individual may obtain an ITIN by applying to the U.S. Internal Revenue Service using IRS Form W-7.
SSN : U.S. Social Security Number. This number is issued to NRA individuals who need a tax identification number, and who entered the U.S. under a visa status that does authorize employment. An individual may obtain a SSN by applying to the U.S. Social Security Administration using SSA Form SS-5 (or Form SS-5-FS if applying from the NRA country of residence).
EIN : U.S. Employer Identification Number. This number is issued to taxpayers that employ others and must report payroll taxes. It is also issued to entities other than individuals (such as partnerships and corporations). A non-resident alien (NRA) entity may obtain a U.S. EIN by applying to the U.S. Internal Revenue Service using IRS Form SS-4.
Can a non-resident alien (NRA) avoid U.S. income tax withholding on taxable payments received from CMU?
Generally, a non-resident alien (NRA) is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a NRA are subject to U.S. tax (30% federal/ 4.35% state). A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person’s country of residence and the United States. The non-resident alien must have a U.S. taxpayer identification number in order to take advantage of any tax treaty benefits that may exist between his/her country of residence and the United States. Following are the various forms that may be submitted by a non-resident alien to apply for a reduced rate of withholding (including exemption).
Form 8233 – “Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual “(Form W-8BEN is used to claim exemption from withholding on compensation for services performed by a foreign business entity).
Form W-8BEN – “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding” (This form is used by foreign business entities claiming treaty benefits on taxable income received from the United States, or by foreign individuals claiming treaty benefits on taxable U.S. income, other than compensation for “services (See Form 8233)).
Form W-8ECI – “Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States” (This form is used by a foreign individual or foreign business claiming exemption from withholding on effectively connected income (e.g., income from commercial activities in the United States).
Form W-8EXP – “Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding” (This form is used by foreign governments, international organizations, foreign tax-exempt organizations, foreign private foundations, and governments of U.S. possessions).
Form W-8IMY – “Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding” Please contact Human Resources, at 3753, or Payroll, at 3481 for assistance with determining what documentation is needed from the non-resident alien (i.e., foreign individual or foreign business/organization) in order to determine if CMU can legally pay them.
I want to bring a foreign entertainer to CMU to perform and his agent tells me that CMU is the only organization/company that requires documentation to determine if our payment to the entertainer is exempt from withholding. Is this true?
No. While some employers/payers are either unaware of the requirements, or they choose not to conform to them, all U.S. entities are required to comply with the relevant U.S. Citizenship and Immigration Services and Internal Revenue Service regulations. We must determine if CMU can legally pay the NRA for performing in the U.S, and if so, we need to withhold taxes on the payment unless we have documentation that exempts the NRA from withholding.
We are working with a U.S. agent to bring a foreign entertainer to CMU to perform. Payment for the agent's fee and the performer's fee will be made directly to the agent. Do we have any concerns?
YES. According to the IRS, if you are making a payment to a U.S. person (agent) and you know that they are receiving that payment as an agent of a foreign person (entertainer), you must treat the payment as being made to a foreign person. Unless the foreign entertainer has a U.S. taxpayer ID number and can provide documentation that would exempt them from withholding, CMU must withhold taxes (30% federal and 4.35% state) from the payment. Even if payment is made out directly to the agent.
We are bringing an individual from another country to CMU to speak to a couple of classes. We have been advised that because the NRA does not have a U.S. taxpayer ID number, he is subject to income tax withholding. We do not want to cause hard feelings with the NRA by issuing a check that has been reduced by the withholding taxes. How can we make a payment that will result in him receiving a "net" check in the amount we originally agreed to pay?
In general, the non-resident alien (NRA) should be responsible for the withholding on any taxable payments from CMU. The department should advise the NRA of this when initiating the contract /agreement. The NRA can file a U.S. tax return (1040NR or 1040NR-EZ) for the tax year if he/she thinks he/she is eligible for a refund of the taxes withheld by CMU.
However, if your department must pay the withholding taxes for the NRA you are bringing to campus, payment to the NRA must be “grossed-up” to include the amount of the taxes (i.e., 30% federal / 4.35% Michigan withholding). The additional payment amount will be reportable income to the NRA. For assistance in calculating the “grossed-up” payment amount, please contact Payroll at 3481. Also, the original contract with the NRA must be revised and signed by the original contract approvers to reflect the additional compensation paid.