INTERNATIONAL TAX CONSIDERATIONS

Non-Resident Alien Payments

International Students/Guest Speakers (Visiting)/Human Subject Payments/etc.

All payments made to or on behalf of a non-resident alien must be reported to the Internal Revenue Service (IRS). In addition, all payments are subject to federal income tax withholding unless the individual is specifically exempted by either U.S. tax law or by an income tax treaty. There are tax treaties with over 40 countries, each of which is unique.  A non-resident alien can be a student, a guest speaker, or a research participant, for example.

Examples of payments made to non-resident aliens include, but are not limited to:

• Wages
• Scholarship/Fellowship
  • Qualified Scholarship/Fellowship – Amount used to pay tuition and fees required of all individuals in a program
  • Nonqualified Scholarship/Fellowship – Amounts that exceed tuition and required fees, and are used for travel, room & board, incidental expenses and optional equipment or require services be performed as a condition for receiving the scholarship or fellowship
• Stipends
• Honorariums
• Human Subject Payments**

Each payment requires the review of certain key factors:

• Visa Type
• U.S. Residency Status (U.S. citizen, resident alien, nonresident alien)

Payments requiring federal income tax withholding are taxed at 14 percent or 30 percent depending on the type of payment.

The 1042-S is the annual tax form that is used to report payments and tax withholding to non-resident aliens.

If a non-resident alien is exempt from federal income tax withholding because of either U.S. tax law or a tax treaty, that individual must file the appropriate form:

• Form 8233 - Compensation (independent contractors and employees) and related payments
• Form W-8BEN – Scholarship, fellowship (no service), royalties, human subject, and other payments

For further information please see the Non Resident Alien (International Students) IRS Tax Treament (1042) Policy.

**Human Subject Payments – The IRS treats human subject payments, whether cash, check, bank card, gift card/certificate or in-kind items (books, DVDs, etc.) as taxable income to the recipient. This means the recipient is supposed to report the payment when he or she files a personal income tax return at the end of the calendar year. As the payor, the University must follow IRS regulations. The required tax treatment of human subject payments depends on the recipient’s tax status.

Regardless of the value of payment, if payment is made by gift card, cash, or gifts-in-kind items, signed receipt or acknowledgement of the payment is required along with the recipient’s full legal name. If payment is made by check, Form 8233 will be required to be completed to process payment by the Procurement Office.

Payments made to human subject participants, who are nonresident aliens, are reported on Form 1042-S. All payments to nonresident aliens are subject to 30% federal income tax withholding unless there is proof of an income tax treaty between the U.S. and the foreign individual’s country of residence (relating to this payment type). If an income tax treaty is determined to be applicable, no tax will be withheld from payment.  To claim benefits under an existing tax treaty, an eligible nonresident individual must file a form with the University (Form 8233) which requires the foreign national to provide a taxpayer identification number and identify the treaty article providing the exemption. Tax treaty benefits are NOT automatic.

Reporting:  Payments to non-resident aliens are reported on a Form 1042-S. When reporting is required, Villanova must collect the following information required to be included on the Form 1042-S: recipient’s full legal name, SSN/ITIN (or HUID), permanent address, and mailing address (if different).