Paying Nonresident Alien Contractors/Payees
Eligibility for a nonresident alien (i.e. foreign national) to receive compensation from an U.S. source depends on the person's visa status (to be discussed in Visa Status Requirements for Short-Term Foreign Visitors). Also see details information on visa options for hiring international visitors at the ISSS website. Compensation, including honorarium, for professional or contractor services include (but are not limited to) the following services or payments:
- Flat payments for living expenses
- Live performances
- Participation in scientific, educational, professional or business conventions, conferences or seminars
- Other services on a short-term, contract basis
- Reimbursement of lost income and other payments
- Business expense reimbursements
International scholars and visitors who receive any of these payments are generally subject to 30% federal tax withholding, unless the amounts are either exempt under the terms of a tax treaty, subject to a lower, or reduced tax rate under the treaty, or exempt from tax under the Internal Revenue Code. For more details see the topic, Tax Treaty Eligibility for Nonresident Alien Independent Contractors.
Lodging and travel expenses paid on a short-term basis, including per diem amounts paid for meals and incidentals, are not subject to tax withholding and reporting as long as they are substantiated business expenses following IRS "accountable plan rules" used to reimburse employee business expenses. For more information see University Policy 3.8.3—Traveling on University Business.
All U.S. source payments, except those exempt from tax under the Internal Revenue Code (i.e., substantiated business expenses) made to, or on behalf of, nonresident alien contractors MUST be reported on IRS Form 1042-S.
Note: Compensation paid for services performed by nonresident aliens outside the United States is not subject to 30% withholding and not reported to the IRS.
Contractor Work Eligibility, Payment Process, and Tax Requirements
Information on the following topics is provided as an aid when paying nonresident alien contractors.
- Visa Status Requirements for Short-term Foreign Visitors
- Restrictions on Payments to Short-term International Visitors (B-1, B-2, WB and WT Visas)
- Tax Treaty Eligibility for Nonresident Alien Independent Contractors
- Nonresident Alien Contractor Payment Processing Requirements
- Individual Taxpayer Identification Number (ITIN)
- Frequently Asked Questions about ITINs and Social Security cards