Tax Information for Foreign Nationals
Payroll meets on a one-on-one basis with international scholars, visitors, and students who are receiving compensation through the Payroll office to determine an individual’s residency status for tax purposes as well as their eligibility for tax treaty exemptions. Based on the Internal Revenue Service’s guidelines, we provide assistance on any questions regarding tax withholding and reporting of payments.
Documentation Requirement for Payments to Foreign Nationals through Payroll
- In order to determine a payee’s U.S. tax residency status and the appropriate tax withholding rates and reporting method, the following documentation is required within the first 30 days of employment and immediately after any extension or changes to employment or immigration status:
- Foreign National Information Form
- Clear copy of your passport identification page(s)
- Clear copy of your U.S. visa
- Copy of I-94 Arrival History: you can access and print your electronic Form I-94 cbp.gov/I94
- Copy of your immigration documentation: Form I-20, Form DS-2019, or Form I-797
- Copy of your Employment Authorization Document (EAD) where applicable: F-1 Optional Practical Training, J-2 work authorization, work authorization based on pending legal permanent residence application, etc.
- The required documentation must be submitted to Payroll Office at 25 Buick Street. If you need assistance with any of the documentation, please contact Payroll via email at email@example.com.
US Residency Status Rules for Tax Purposes
- Resident aliens in the U.S. are under a different tax structure than non-resident aliens. A foreign national becomes a resident alien for tax purposes by passing either the “green card” or “substantial presence” test.
- Green Card Test – If a foreign national has been issued a Permanent Resident Card, also known as a green card (I-551), and the card is still valid, the person is said to have passed the green card test.
- The Substantial Presence Test – The substantial presence test is a method used by the IRS to determine if an individual should be taxed as a nonresident alien. This test is applied each year and, in general, is a calculation of the number of days that an individual has been or will be physically present in the U.S. during a three calendar year period.
- The “Exempt Individual” Rules Certain individuals who are present in the U.S. under the following circumstances are not required to count days toward the substantial presence test and are considered non-resident aliens:
- A teacher, researcher or trainee who is temporarily present in the U.S. under a J or Q immigration status during two calendar years or less.
- A student who is temporarily present in the U.S. under an F, J, M, or Q immigration status during five calendar years or less.
- A foreign government-related individual (generally an A or G Immigration Status).
FICA Tax Exemption for F, J, M, and Q Immigration Status
- An individual can be exempt from FICA (Social Security and Medicare) tax withholding if he or she meets all for the following criteria:
- in non-resident alien status for tax purposes
- present in the U.S. under F-1, J-1, M-1, or Q-1 immigration status
- performing services in accordance with the primary purpose of the visa’s issuance (i.e., the primary holder of the immigration status, the “-1”). A visa holder’s spouse/dependents (the “-2”) will not meet this requirement because their employment does not “carry out the purpose” of the F-2, J-2, M-2, or Q-2 immigration status of accompanying the primary visa holder to the U.S.
- FICA taxes only apply to wages; it does not apply to fellowship payments. Students receiving a fellowship will not have FICA taxes withheld from their paycheck.
Income Tax Treaties
- The primary purpose of a tax treaty is to avoid double taxation by exempting an individual from all or part of the federal and state taxes withheld from payroll payments. The existence of an income tax treaty between the U.S. and an individual’s home country does not mean that an individual will automatically be exempt from taxes; each individual’s case is unique. In order to be exempt from taxes each individual must meet specific qualifications and have a valid U.S. tax identification number.
- If an individual qualifies for a tax treaty exemption, the University may exempt the individual from U.S. tax withholding. In this case, Payroll will contact the individual to sign either Form 8233, Form W-8BEN, or Form W-9. The form used to claim the tax withholding exemption is determined by the type of income received; individuals who receive several types of income may be required to sign more than one treaty form.
Requirements for Extending Tax Treaty Benefits
- For foreign nationals currently claiming tax treaty benefits:
You must complete updated tax forms for each calendar year if you are claiming a tax treaty exemption on wages and/or scholarships provided by Boston University. In December of every year, you will receive an email from the Payroll Office requesting that you sign the upcoming year’s treaty form. The three possible tax treaty forms are:
- Form 8233, Exemption from Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual, is only valid for the tax year in which it was filed. As an example, 8233 Forms filed in 2014 expire on December 31, 2014.
- Form W-9, Request for Taxpayer Identification, is used to claim tax treaty benefits by foreign nationals considered Resident Aliens for tax purposes. When this form is used to claim treaty benefits, the form must be signed every calendar year.
- Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Withholding, is valid for three calendar years and must be signed every three calendar years for as long as you are receiving a fellowship. As an example, Forms W-8BEN signed in calendar year 2013 will expire December 31, 2015.
Paying an Honorarium to a Foreign National
- What You Need to Know Before Paying an Honorarium to a Foreign National Many foreign nationals are prohibited from receiving honoraria payments due to their visa type and those who are eligible will generally have 30% of their payment withheld by the IRS. All required information should be submitted to Accounts Payable and Payroll as soon as possible to ensure that payments are made promptly and correctly.
- Summary of Immigration Status Visa Categories
- Payment of an honorarium for the following visa categories is permitted, but must comply with the restrictions listed on the B Honoraria Eligibility Certification:
- B-1 – Visitor for Business
- B-2 – Visitor for Pleasure
- VWB – Visa Waiver for Business
- VWT – Visa Waiver for Tourism
- Payment of an honorarium is permitted for the following visa categories with restrictions:
- F-1 – Students (not sponsored by Boston University) with authorization from their school for CPT or OPT with Employment Authorization Document (EAD)
- J-1 – Exchange visitors including students, scholars, researchers, and trainees (not sponsored by Boston University) must receive a written permission letter from their sponsoring institution
- J-2 – Dependents of J-1 exchange visitor with EAD
- Documents Necessary for Paying an International Visitor an Honorarium:
- Disbursement Request Form and backup
- Copy of Passport Identification Page
- Copy of I-94 or Immigration Stamp when entered the US
- If J-1 scholar: a copy of Permission Letter and DS-2019 Form
- If person’s visa immigration status is B-1/B-2 or Visa Waiver, the B Honoraria Eligibility Certification
- Completed Foreign National Information Form. If a recipient is eligible for a tax treaty, they must sign the treaty form provided by Payroll in order to receive the exemption.
- If the individual does not have either a SSN or ITIN, is considered a nonresident, or if there is no tax treaty with their country they will be taxed at 30% withholding of federal tax. If you know that the individual receiving the payment will have to pay taxes and you would like them to receive a specific amount, please gross up the payment amount.
1042-S and W-2 Information for Foreign Nationals
- Following the end of each calendar year, every person who earns income in the US must file a personal income tax return reporting on wages earned in that calendar year with the Internal Revenue Service (IRS). To assist you in completing your personal income tax return, the University will mail informational tax forms to you. Based on your individual earnings, taxes paid and tax treaty eligibility you may receive a Form W-2, 1042-S, or both from the University. Important – Please make sure that you notify the Payroll Office before January 1st of any address changes in order to ensure you receive your appropriate tax documents.
- The W-2 Form reports all taxable wages received from Boston University during the calendar year and the taxes withheld from those wages. If you are going to receive a W-2, it will be mailed to you by January 31st of each year.
- The 1042-S is a year-end tax document given to Non-Resident Aliens who received wages or scholarships in any of the following ways:
- Wages earned under tax treaty benefits
- Non-Qualified Scholarship /Stipend
- International Students who received scholarships in excess of tuition and required fees which
were credited directly to their student account. The IRS regulations state that these amounts must be reported on the 1042-S Form and taxed at the rate of 14%. To meet these IRS requirements Boston University pays the tax due on behalf of students and forwards the information to student accounting. Student Accounting will add this amount to the student’s account to be collected from the student.
- Please do not file your personal income tax return until you have received all of the tax documents that pertain to you. If you are unsure if you will be receiving a tax document or believe that there is an error on your W-2 or 1042-S, contact the Payroll Office at firstname.lastname@example.org.
- Please visit the ISSO Tax Information Page to read more about your tax filing obligations as well as to find resources available to help you file your tax form.
Scholarship, Fellowship, and Stipend Payments
- Nontaxable payments are referred to as “qualified” scholarships and must meet the following specifications to be considered tax-exempt:
- The scholarship or fellowship is awarded to a candidate for a degree
- The scholarship or fellowship is used to pay for tuition and fees required for enrollment or attendance at the BU, and/or other mandatory fees, and supplies required to be used by all students in a particular course of study.
- Taxable payments are referred to as “non qualified” scholarships and are paid to foreign students, trainees and researchers to assist them with their personal living expenses. Stipends are taxed as income at a rate of 14%, unless the student claims an exemption due to a tax treaty. Departments can award stipend payments through the Payroll or Accounts Payable Office. For stipends paid through Payroll, please ensure that payee sends the following documentation to main Payroll Office at 25 Buick Street before first payment is issued:
- Foreign National Information Form
- Clear copy of recipient’s passport identification page(s)
- Clear copy of recipient’s U.S. visa
- Copy of I-94 Arrival Form, found at cbp.gov/I94
- Copy of I-20 or DS-2019 Form
- If a disbursement will be processed through Accounts Payable, it is the responsibility of the sponsoring department to collect all listed above documentation from their international recipients and submit it along with Disbursement Request Form to Accounts Payable at 25 Buick Street.
Should you require assistance with any of the above information, please contact the Payroll Office via email at email@example.com. The Payroll Office is located on the 1st floor at 25 Buick Street.