This web page is intended for reference with respect to issues regarding payments made to Nonresident Aliens and the taxability of those payments.  It is NOT intended to be used to determine immigration issues.

For help with filing your 1040NR or 1040NREZ click here

About GLACIER

Foreign National Students

Foreign National Students (hereinafter known as Students) are individuals in the United States engaging in a full course of academic study in an accredited educational program.

Students may be awarded scholarships.  A scholarship is taxable to the extent it exceeds the amount paid for tuition, books and required fees.  Tax relief may be available to students who are eligible for tax treaty benefits.

Students may be employed with certain restrictions.  Wages are taxable.  Tax relief may be available for students who are residents of tax treaty countries.   Qualified students are exempt from FICA tax.

 VISA TYPE F-1

REQUIRED DOCUMENTATION

The following documents must be presented to the Payroll Department before any scholarship or wage payments will be issued:

1. Passport - including the I-94 Card and Visa with photo.

2. Form I-20 from UTSA.

3. Student employees must have a Social Security number.

4. Student's receiving scholarships only must have either a Social Security number or an Individual Taxpayer Identification Number (ITIN).

REQUIRED FORMS

The following forms must be completed and submitted to the Payroll Department before any scholarship or wage payments can be issued:

1. All nonresident alien students eligible for treaty benefits who are receiving scholarships must complete Form W-8BEN.

2. All students receiving wages as employees must complete a Foreign National Information Form and a Form W-4.   All nonresident alien student-employees who are eligible for tax treaty benefits must also complete Form 8233 and the applicable attachment.

3. The payroll office will determine tax treaty benefit eligibility.

TYPES OF PAYMENTS

A student may receive wages subject to the employment restrictions below.  A student may receive a scholarship subject to the study restrictions below.

A student may NOT receive compensation as an Independent Contractor.

STUDY RESTRICTIONS

Students must maintain full-time enrollment as defined by the academic institution.  Part-time study must have the approval of the DSO (Designated School Official) in accordance with INS guidelines.

EMPLOYMENT RESTRICTIONS

Students may be employed on campus for a maximum of 20 hours per week while classes are in session.  Part-time, on campus employment is authorized by the UTSA; prior INS approval is not required.  

Students may be employed on campus for a maximum of 40 hours per week during school vacations, if the student intends to enroll for the next semester.

Economic exceptions for off-campus employment must be recommended by the DSO on Form I-20 and approved by INS.  An EAD (Employment Authorization Document), issued by the INS, is required.

May participate in employment directly related to the student's field of study.  The employment may be in the form of 

Curricular Practical Training - employment required for the student's degree program.  Requires the approval of the DSO on Form I-20ID.  An EAD is not required.  The employment authorization is employer specific.

Optional Practical Training - employment during or after completion of studies.  The total period of employment may not exceed 12 months.  OPT must be recommended by the DSO and approved by the INS.  An EAD, issued by the INS, is required.

TAX IMPLICATIONS

Scholarships - qualified scholarships are tax exempt under IRC 117 and are not reported on Form 1042S, effective for scholarships payments made after 12/31/2000.  

Non qualified scholarships are taxable.  UTSA is required to withhold 14% of the non-qualified portion of any scholarship from any student who is not eligible for tax treaty benefits.

Wages - wages for students who are not eligible for tax treaty benefits have taxes withheld at the same graduated rate applicable to U.S. Citizens.  Qualified students are not subject to FICA taxes.

VISA TYPE J-1 - Student

REQUIRED DOCUMENTATION

The following documents must be presented to the Payroll Department before any payments can be issued:

1. Passport - including the I-94 Card and Visa with photo.

2. Form DS-2019 from UTSA.

3. Student employees must have a Social Security number.

4. Student's receiving scholarships only must have either a Social Security number or an Individual Taxpayer Identification Number (ITIN).

REQUIRED FORMS

The following forms must be completed and submitted to the Payroll Department before any scholarship or wage payments can be issued:

1. All students eligible for treaty benefits who are receiving scholarship must complete Form W-8BEN.

2. All student receiving wages as employees must complete a Foreign National Information Form and a Form W-4.  All students-employees who are eligible for tax treaty benefits must also complete Form 8233 and the applicable attachment.

3. The payroll office will determine tax treaty benefit eligibility.

TYPES OF PAYMENTS

A student may receive wages subject to the employment restrictions below.  A student may receive a scholarship subject to the study restrictions below.

A student may NOT receive compensation as an Independent Contractor.

STUDY RESTRICTIONS

Must maintain full-time enrollment as defined by the academic institution.  Part-time study must have the approval of the DSO (Designated School Official) in accordance with INS guidelines.

EMPLOYMENT RESTRICTIONS

May be employed on campus for a maximum of 20 hours per week with prior written authorization from the Responsible Officer (RO) of their designated program.   Prior INS approval is not required.  

May work off campus under limited circumstances provided they have obtained prior written authorization from the RO. 

Employment does not require additional permission from the INS or an EAD.  The 240 day rule applies (see glossary).  

TAX IMPLICATIONS

Scholarships - qualified scholarships are tax exempt under IRC 117 and are not reported on Form 1042S, effective for scholarships payments made after 12/31/2000.  

Non qualified scholarships are taxable.  UTSA is required to withhold 14% of the non-qualified portion of any scholarship from any student who is not eligible for tax treaty benefits.

Wages - wages for students who are not eligible for tax treaty benefits have taxes withheld at the same graduated rate applicable to U.S. Citizens.  Qualified students are not subject to FICA taxes.

Foreign National Employees

For Student Employees - see Students above

VISA TYPE J-1 - Short-term Scholar, Professor, Researcher or Specialist

Individuals in the United States as a short-term scholar, professors, researches, or specialist under the auspices of the United States Information Agency and a designated program sponsor.  

REQUIRED DOCUMENTATION

The following documents must be presented to the Payroll Department before any payments can be issued:

1. Passport with the I-94 Card and VISA with photo.

2. DS-2019 from UTSA.

3. Form W-4

REQUIRED FORMS

            1.    Foreign National Information Form

TYPES OF PAYMENTS

Wage payments from the sponsoring institution only

STUDY RESTRICTIONS

           May engage only in part-time incidental study provided program can be completed within limitations of stay.  May not enroll in a formal degree-granted academic program while in a J-1 status as a professor, researcher, short-term scholar or specialist.  

EMPLOYMENT RESTRICTIONS

           May be employed only by the designated program sponsor or appropriate designee, and within the guidelines of the program approved by the USIA for the period of validity as stated on the DS-2019.  Under limited circumstances, may receive compensation from other institutions provided prior written authorization from the Responsible Officer of their designated program has been secured.  Form DS-2019 authorizes employment.  EAD is not required.

TAX IMPLICATIONS

Taxed on wages using the graduated withholding rates.  May be eligible for treaty benefits. Is not subject to OASI tax while in exempt status - usually two calendar years.

VISA TYPE H-1B - Temporary Worker in a Specialty Occupation

REQUIRED DOCUMENTATION

The following documents must be presented to the Payroll Department before any payments can be issued:

1. Passport with the Form I797A  and VISA with photo.

REQUIRED FORMS

1. Foreign National Information Form

2. Form W-4

TYPES OF PAYMENTS

Wage payments from the sponsoring institution only

STUDY RESTRICTIONS

           May engage in incidental study while maintaining H visa status.

EMPLOYMENT RESTRICTIONS

          Employment permitted only with the sponsoring institution that obtained INS approval for the visa classification.  Prohibited from receiving payments from other organizations.  However, the individual may receive INS approval to work in H-1B status for more than one employer.  Each employer must petition INS and receive approval for the employment.  INS Form I-797A authorizes employment.  EAD is not required. 

TAX IMPLICATIONS

Wages are taxed at the graduated withholding rates, and is subject to OASI tax.

Foreign National Consultants & Independent Contractors 

 It is strongly recommended that you contact the Payroll office early in the approval process in order to avoid possible misunderstandings later, as in some cases a payment may not be allowable.  For A payment to a nonresident alien for independent personal services, use a Services Agreement

REQUIRED DOCUMENTATION

The following documents must be presented to the Payroll Department before any payments can be issued:

1.  Social Security Number or ITIN (Individual Taxpayer Identification Number)

2. Passport with the B-1/B-2 or "WB" or "WT" stamp or the NRA's Form 1-94, Arrival/Departure Records, if she/he is from a visa waiver country.  VISA with photo

REQUIRED FORMS

1. Fully approved Services Agreement and Vita/Resume

2. IRS Form 8233, if the nonresident alien is claiming exemption from withholding tax under a tax treaty between USA and his/her country of residence

3. Signed 9/5/6 statement - explained below

4. Local funds voucher for payment

TYPES OF PAYMENTS

 Honorarium payments to B-1, B-2, WB and WT Visa Holders– can be paid to a foreign national in visitor status in the United States who is engaged in usual academic activities for the benefit of the institution under the following conditions (known as the 9/5/6 rule)

1. Activity must not last longer than 9 days at any single institution, and

2. The individual has not accepted such payment or expenses from more than 5 institution or organizations in the previous 6 months period.

3. A signed statement from the individual must be obtained and attached to the voucher certifying that the individual qualifies for payment of an honorarium or expenses under the above condition (Insert the form for the 9/5/6 rule here)

Actual expenses - can be reimbursed with original receipts (must have business purpose)

TAX IMPLICATIONS

If  tax treaty benefits are available and claimed, the Form 8233 is completed and signed by the consultant/independent contractor then submitted to the payroll office for review and subsequent filing with the IRS. A 10 day waiting period is required by the IRS before a check can be issued to the consultant.

If tax treaty benefits are not available or not claimed, 30% of the payment for services will be withheld from the gross amount due and subsequently deposited with the IRS. 

A Form 1042S will be issued to the independent contractor no later than March 15th of the year following the year in which the payment was made. This form is file with the consultants Form 1042NR.

Accountable plan rule – no reporting and no withholding is required on documented business expense reimbursements supported by original receipts in accordance with policies and procedures at UTSA.

Undocumented business expense reimbursements –  are subject to withholding at the 30% rate, unless exempted by tax treaty. 

Visa Types-Most Common to UTSA

B-1      Visa for Visitor for Business.  No work authorization required.  Eligible to receive an honorarium, with restrictions, and reimbursement for certain business related expenses.

B-2      Visa for Tourist (visitor for pleasure) No work authorization required.  Eligible to receive an honorarium, with restrictions, and reimbursement for certain business related expenses.

F-1       Visa for Students.  Work authorization with certain restrictions. 

F-2       Visa for Dependents of Students.  No work Authorization.

J-1       Visa for Exchange Visitor as a Student.  Work authorization under certain circumstances. 

J-1       Visa for Exchange Visitor as a Scholar. Work authorization sponsored by employer. 

J-1       Visa for Exchange Visitor as a Trainee, Researcher or Teacher.   Work authorization sponsored by employer. 

H-1B    Visa for Professionals.   Work authorization sponsored by employer.  Cannot work at any other location, unless they received an H-1B from that employer. 

TN       Visa for Trade NAFTA.  Work authorization sponsored by employer.  Canadian citizen entering the USA under NAFTA provisions for specific temporary employment.

TD       Visa for Trade NAFTA.  No work authorization.

WB      Visa for Business traveler entering the U.S. from a country included in the Visa Waiver Program. No work authorization required.  Eligible to receive honorarium, with restrictions, and reimbursement for travel expense and per diem.  Visa Waiver Pilot Program Countries, include Andorra, Argentina, Australia, Austria, Belgium, Brunei, Denmark, Finland, France, Germany, Iceland, Rep. Of Ireland, Italy, Japan, Liechtenstein, Luxembourg, Monaco, Netherlands, New Zealand, Norway, San Marino, Slovak Republic, Spain, Sweden, Switzerland, and United Kingdom.   Canada is visa exempt.

 

Glossary

Internal Revenue Code 117 - IRC 117 - governs the taxability of scholarships.

Qualified Scholarship - that portion of a scholarship that is used for tuition, required fees and books.

Nonqualified Scholarship - that portion of a scholarship that exceeds the qualified scholarship.  A full scholarship that covers tuition, fees, books and room and board has both qualified and nonqualified portions.  The nonqualified portion, room and board, is taxable at 14% unless the student is eligible for tax treaty benefits.

Substantial Presence Test - a physical presence test that is used to determine the tax residency of an individual who is not a U. S. Citizen.  

Designated School Official - DSO -

Employment Authorization Document - EAD -

I-94 Card - Admission/Departure Record -  - INS Arrival/Departure Record that the visitor receives upon entry to the USA. Indicates Admission number, Visa Type, place/date or admission to the USA, and specific period of authorization stay (or duration of status – D/S).

Form I-20 – Certification of Eligibility used to obtain an F-1 student visa.  F-1s are usually privately funded, full-time degree seeking students.  The specific program and expected date of completion of studies are on the form.  Can only be issued or endorsed by the DSO.

Form DS-2019 (formerly Form IAP-66) – Certificate of Eligibility used to obtain a J-1 Exchange Visitor visa.  The form can only be issued and endorsed by a Responsible/Alternative Responsible Officer (in the international office).  J-1 Students are usually those funded by a government or institution, and may be participating in an exchange or cooperative education program.  Other IAP-66 categories include Research Scholar, Professors, etc.

FICA taxes - taxes withheld from U.S. tax residents for retirement.  FICA taxes are authorized under the Federal Income Contributions Act (FICA) and are referred to as OASI (Old Age Survivors Insurance) taxes . Also commonly referred to as Social Security tax, because the payments are made to the Social Security Administration.

240 day rule - If the employer files a timely extension of stay, the employee may continue to work for a period not to exceed 240 days during the time the application is pending, beginning on the date of expiration of the authorized period of stay.

Nonresident Alien for Tax Purposes – an individual who has not met or “passed” the substantial presence test by virtue of the number of days physically present in the USA or has not been granted lawful permanent residence in the USA as a permanent resident alien.  A nonresident alien has been present in the USA for a period of time short enough or for a particular reason so as to be treated more closely connected to his home country rather than to the USA.  A nonresident alien is taxed only on his income from the USA sources, using special tax withholding, reporting, and filing guidelines different than those applied to USA citizens and resident aliens for tax purposes.

FORMS

Foreign National Information Form - a UTSA form - must be completed by all nonresident alien employees, including student employees.  The employee's history of presence in the U. S. is reported on this form for Substantial Presence Test purposes.  This form must be completed each year a nonresident alien is employed by UTSA before the first pay cycle of new calendar year (approx December 10th). This form can be only be obtained from the Payroll department.  Call the payroll office for more information.

Form W4 - Employee's Withholding Allowance Certificate - required for all employees.  All nonresident aliens are required to elect single status claiming only one allowance with an additional $33.10 withholding to be deducted.  This form can be found at Form W-4.

Exception:  nonresident aliens who are citizens of American Samoa, Canada, Korea, Japan, Mexico, the Northern Mariana Islands, and students from India may, in certain cases, be permitted to claim an additional allowance for their spouse and dependents.

W-4 procedures for Nonresident Aliens

Due to Internal Revenue Service guidelines, nonresident aliens are required to complete the W-4 form following the special rules listed below:

1.     On line 3, you must check the “single” box if you are single: or the        “Married, but withhold at higher single rate” box if you are married. 

2.    On line 5, you must indicate “1”.

3.    On line 6, you must indicate “$33.10”.  (The IRS requires that this additional amount be withheld monthly from your pay, provided that you are not exempt from income tax by virtue of a tax treaty between your country and USA).

Please do not enter “Exempt” on line 7; leave it blank.  (Determination of whether you are exempt from U.S. Income Tax by virtue of a tax treaty will be made through a review of your VISA status and Foreign National Information form by the Payroll Office). 

Form W-8BEN - Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding - required to be completed by all students eligible for treaty benefits who are receiving scholarships. This form is used to elect tax treaty benefits, if qualified, for non-compensation payments: scholarships and fellowships.  This form can be found at Form W-8BEN.  See instructions for this form.   After completing this form, please hand deliver this form to the Payroll Office, JPL 4.04.20. 

Form W-9 - Request for Taxpayer Identification Number and Certification - completed by resident aliens who are taxed as U. S. Citizens.  This form can be found at Form W-9.  See instructions for this form.  After completing this form, please hand deliver this form to the Payroll Office, JPL 4.04.20. 

Form 8233 - Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual - required to be completed by all nonresident alien employees and nonresident alien consultants who are eligible for tax treaty benefits.  This form is used to elect tax treaty benefits for independent and dependent personal service compensation.  This form can be found at Form 8233.  See instructions for this form.  After completing this form, please hand deliver this form to the Payroll Office, JPL 4.04.20. 

Form 8843 - Must be filed with 1040NR by teachers or trainees on a "J" visa or students on a "F" or "J" visa to exclude the days of presences in the United States.

Form W-2 Your U.S. employer will use this form to report the income earned and tax withheld during the tax year.   You will receive your W-2 by the end of January for the previous year.  You must attach a copy of your W-2 to your Federal Tax returns.

Form 1040NR - U.S. Individual Income Tax Return.  Income Tax form used by those filing as non-residents for tax purposes.  File between January 1 and April 15 for each tax year if you have earned income; by June 15 if you have no earned income.  See instructions for this form.

Form 1040NREZ - U.S. Individual Income Tax Return, Same as above but only easier to complete.

Form 1042S - 

Form I-9 - Employment Eligibility Verification Form.  All employers must have their employees complete the INS form to show that the employee is authorized by INS for work.

REFERENCE WEB SITES

Immigration and Naturalization Service

Internal Revenue Service

Tax Treaties and Technical Explanations

or

Treasury Department Tax Policy Documents

UTSA Payroll Home Page