TAX DIRECTIVE REGARDING PAYMENTS TO NONRESIDENT ALIENS
(Tax Reporting and Withholding Requirements for Payments to Nonresident Aliens)
Tax Directive: All campuses must establish and implement procedures to ensure proper reporting and withholding of all payments to foreign visitors, in accordance with the tax rules described in the “University of Colorado Tax Guide for Foreign Visitors.”
Overview: Payments to nonresident aliens must be reported to the nonresident alien and to the Internal Revenue Service. The only exception to the reporting requirement is for reimbursement of expenses made under an “accountable plan.” In addition to the reporting requirements, some payments to nonresident aliens are subject to payroll taxes and/or withholding. Tax treaties may govern the taxability of some payments to nonresident aliens.
University Responsibilities
(1)Maintain compliance with both the letter and intent of all federal, state, and local laws
(2)Properly withhold from payments to nonresident aliens and report to the appropriate federal and state agencies
Sponsoring Department Responsibilities
(1) Hosting department bears primary responsibility for ensuring that payments are in compliance with federal and state tax and immigration laws.
-Must contact Office of International Education (Boulder), Dean’s Office, School of Medicine (UCHSC), Office of International Education (UCD), or the Personnel Office or Accounts Payable Office (UCCS) prior to making any contractual arrangement to pay a foreign visitor.
-Prior to ANY payment, appropriate authorization and visa status must be given by the Immigration and Naturalization Service (INS) in advance of foreign visitor’s arrival at CU
-Foreign visitor must have valid I-94 authorization.
(2)Hosting department must ensure that each foreign visitor has either a social security number or an individual taxpayer identification number.
(3)Hosting department will be responsible for any penalties, fines and interest from noncompliance
Once legality of payments is established, the University must ensure proper tax reporting and withholding on the payments. The Internal Revenue Code controls tax reporting and withholding rules. Tax treaties, if in force, may control withholding.
There are three types of payments, for tax purposes:
(1)Wages: Unless exempt by treaty, usually graduated withholding rates and FICA applies. Similar requirements for Colorado state and local taxes. Reportable to nonresident alien (“NRA”) individuals and IRS on Form W-2.
Campus Payroll Offices currently review all documentation, applicable tax treaties, and ensure proper reporting and withholding is performed for payment of wages.
(2)Payments to Independent Contractors (non-employee compensation): Unless treaty provisions apply, payments are subject to reporting and 30% withholding. Similar requirements for Colorado state and local taxes. Reportable to NRA individuals and IRS on Form 1042S.
Paid through Accounts Payable. All campuses must have a process in place to perform check of documentation, treaty review, and required reporting and withholding through coordination with their campus Payroll NRA Tax Specialist.
(3)Fellowships and scholarships: Payments are subject to reporting. Unless exempt by treaty, or for generally qualified tuition, fees and educational expenses, subject to 14% withholding. Similar requirements for Colorado state and local taxes. All campuses must have a process in place for reporting and withholding on scholarships.
Date Issued: January 29, 1999