Davidson College must determine the legality and tax consequences of payment for all potential payees. Therefore, information regarding immigration status and Visa type must be obtained before payment can be made directly to or on behalf of a Foreign National.
This policy identifies procedures for payments made to employees for services rendered.
The various college departments shall assist Business Services in complying with all federal and state laws regarding payment to foreign nationals.
A "Responsible Officer" is the college employee who coordinates the selection and employment of a foreign national.
The term ''United States Person'' means:
A "Foreign National" (foreign person) includes:
Generally, the U.S. branch of a foreign corporation or partnership is treated as a foreign person. Refer to IRC 7701(a)(31) for the definition of a foreign estate and a foreign trust.
The Controller/Director of Business Services shall oversee this policy and review it at least once every two years. Changes to this policy shall be made in accordance with the college's Policy on Policies. The Foreign National Payroll Processing Policy shall be implemented according to the following procedures:
Step 1: The college department requesting payment to an individual or to a third party on behalf of an individual (e.g. an agent, including U.S. based agents) is responsible for identifying a Foreign National. The requesting department is also responsible for obtaining necessary information from a potential payee.
Step 2: Once the host department determines that a payee is a Foreign National, the department should determine if the Foreign National is traveling under the proper visa. The most common visa types that allow compensation for an honorarium are B-1, B-2, WB, WT, TN, and J-1. (Canadians admitted without an I-94 or TN visa are considered to be on a B-1 or B-2 visa). However, the B-1, B-2, WB and WT visa holders can be paid honoraria only if they are at the college no longer than 9 days and have not accepted payment or expenses from more that 5 institutions in the previous 6 month period. Visitors that are to receive honoraria and exceed this restriction will need to get a J-1 visa or, if Canadian or Mexican, a TN visa. Obtaining the J-1 visa may take 4 - 8 weeks. If a visitor traveling under a J-1 visa is sponsored by another institution, we are required to have prior written authorization from that college's Responsible Officer before we can compensate the visitor. Permission from academic departments is not acceptable
Step 3: Next, the host department should determine if the Foreign National has a social security number or an International Taxpayer Identification Number (ITIN). If the Foreign National has a social security number or an ITIN, proceed to step 3. If the Foreign National does not have a social security number or an ITIN number and plans to claim treaty benefits, the department should send an Internal Revenue Service (IRS) Form W-7 Application for IRS Individual Taxpayer Identification Number with instructions to the Foreign National. Form W-7 requires documentation substantiating foreign/alien status and true identity of the individual. The required documentation and completed Form W-7 may be mailed to the IRS Philadelphia Service Center, presented at an IRS Walk-in office, or processed through an Acceptance Agent authorized by the IRS. (A list of current Acceptance Agents for Form W-7 may be found at this link: IRS Acceptance Agent Program.) Processing may take 4-6 weeks. The IRS requires a Foreign National to have either a social security number or an ITIN number in order to claim exemption from tax withholdings. If a Foreign National does not have a social security number or ITIN, then taxes will be deducted from the total payment at the rate of 30% as required by federal law. If the payment is greater than $1,500, an additional 4% will be added to the rate according to state law. These taxes are remitted directly to the IRS/N.C. Dept of Revenue and therefore cannot be reimbursed. If the Foreign National does not obtain a social security or an ITIN, the college will incur a $50 penalty from the IRS and this penalty will be transferred to the host department (More information about Individual Taxpayer Identification Numbers can be found at Publication 1915, Understanding Your IRS Individual taxpayer Identification Number. A Spanish version is also available).
Step 4: The host department should provide the payee with a Foreign National Information Form (Orange Form). The Foreign National must properly complete the form, along with copies of all applicable documents, and return it to the Davidson College Payroll Office no later than 30 days prior to the payment date.
Step 5: Upon receipt of the Orange Form, the Payroll Coordinator will determine if payment to the Foreign National is allowable based on INS/IRS regulations. If the payment is allowable, the Payroll Coordinator will determine the need for withholding of federal and state taxes based on current tax laws. If payment is not allowable, the Payroll Coordinator will contact the Davidson College host department.
Step 6: The Payroll Coordinator will generate any additional forms required by the IRS. The forms will be given to the Davidson College host department.
Step 7: The Davidson College host department will provide the forms to the Foreign National for signature and any additional documentation required. The Foreign National should return the forms and documentation to the host department. If the Foreign National completes an IRS Form 8233, Exemption from Withholding Form, signs the related treaty, and plans to claim treaty benefits, the individual cannot receive payment for 10 business days after the Form 8233 has been sent to the IRS. Therefore, the host department must return the completed forms and documentation (which may include IRS Form 8233) to the Payroll Coordinator no later than 10 days prior to the payment date. If the college has not paid prior to 10 business days, 30% (or 34% if the payment is greater than $1,500) will be withheld from the money paid. The Foreign National may then request a refund of tax withheld by filing IRS Form 1040NR, Income Tax Return for Nonresident Aliens, at the beginning of the next calendar year, after receiving IRS Form 1042S, Foreign Recipients of U.S. Income, (which is comparable to IRS Form W2) from the college.
Step 8: After arrival in the United States, the Foreign National must submit a copy of both sides of the I-94 Form "Arrival and Departure Record" to the Senior Accounts Payable Assistant or Payroll Coordinator before payment will be released.
Step 9: The Davidson College host department should make requests for direct payment of honoraria and/or reimbursement of travel expenses associated with the Foreign National's visit by completing an Accounts Payable Voucher. The Accounts Payable Voucher should clearly indicate that the payment is for a Foreign National. Depending on the type of payment being made and the existence of treaty benefits, 30% (or 34% if the payment is greater than $1,500) may be withheld from the payment. Adequate documentation for travel expenses (e.g. receipts, travel itinerary) must be attached to the Accounts Payable Voucher in order to receive payment. Such reimbursements are generally not subject to withholding. However, travel grants, reimbursements, and/or payments made in connection with a scholarship or fellowship are subject to withholding. The completed Accounts Payable Voucher should be submitted to the Senior Accounts Payable Assistant 10 days prior to payment.
Last Reviewed: Summer 2010