Requirements for Payments to Foreign Nationals, Nonresident Aliens (NRAs) and Foreign Organizations
Directive Statement
This directive establishes the proper methods of making employment, independent contractor/honorarium, fellowship, and foreign corporation payments to foreign nationals and nonresident aliens (NRAs).
Reason for Directive
Payments made to foreign nationals or nonresident aliens (NRAs) are subject to withholding tax requirements on their U.S. source income. Therefore, all payments to foreign nationals or NRAs must be approved by Payroll Services by completing the Foreign National Tax Information Form before Payroll or Disbursements can issue any payment.
Who must comply?
All departments processing a payment to a foreign national or nonresident alien.
Procedures
- The department and foreign national or nonresident alien (NRA) will complete the Foreign National Tax Information Form
- All payments to individuals require the following documentation to be attached:
- Copy of Visa and Passport page showing passport number
- Copy of I-94 AND Travel History
- Form DS-2019 (J-1)
- Verification against the Specially Designated Nationals and Blocked Persons List (SDN)
- Copy of Social Security Card or Individual Taxpayer Identification Number (ITIN)
- In addition, depending on the type of individual payment, the following additional documentation is needed:
- For Employment Payments:
Copy of I-20 (F-1), I-797 (H-1B), or Form I-766 (EAD Card)
Copy of I-9, Employment Eligibility Verification, submitted to HR - For Independent Contractor/Honorarium Payments:
Copy of Invitation Letter – must show dates of lecture and dollar amount offered - For Fellowship Payments:
Copy of I-20 (F-1), I-797 (H-1B)
Copy of Memorandum of Understanding
- For Employment Payments:
- Payments to a Foreign Corporation performing services in the U.S. require the following documentation:
- Form W8-BEN-E and mark box 10 for zero percent withholding
- The foreign corporation must have a U.S. Employer Identification Number (EIN) to receive tax treaty benefits
If they do not have a U.S. EIN: Complete Form SS-4 to obtain one. Note: If the university does not receive a U.S. EIN it is required by law to withhold 30% tax on the payment
- Send the completed form and all required documentation to Payroll Services, PO Box 113201
- Payroll Services will enter the information into Windstar, the tracking system to determine residency for tax purposes
- Windstar will generate the following:
- PeopleSoft Tax Withholding Information Form (PTWIF)
- IRS Forms (such as W-4, W-9 for employees considered resident aliens for tax purposes based on the substantial presence test, Treaty Analysis Log and a Tax Treaty if applicable)
- Payroll Services will send these documents to the department
- The department has the foreign national or nonresident alien sign the IRS Forms received from Payroll Services
- If applicable, the hiring department should enter the foreign national into an Electronic Personnel Action form (ePAF) after the PTWIF is received and the IRS Forms have been signed
- The PTWIF will serve as guidance for entering the payment/hire into ePAF
Forms
Form DS-2019
Certificate of Eligibility for Exchange Visitor (J-1) Status 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 UF International Office). J-1 Students are usually those funded by a government or institution. They may be degree-seeking or participating in a reciprocal exchange or cooperative education program. Other DS-2019 categories include Research Scholar, Short-Term Scholar, Professor, and Student Intern. Before the advent of the SEVIS system, the form used for J-1 visitors was called “IAP – 66.”
Form I-797
A form used by the U.S. Citizenship and Immigration Services (USCIS) to grant complementary immigrant benefits and status. It is the H1B approval notice issued by USCIS for work authorization.
Form I-9
Employment Eligibility Verification form required by U.S. Citizenship and Immigration Services. It is used by an employer to verify an employee’s identity and to establish that the worker is eligible to accept employment in the United States.
Form I-20
Certification of Eligibility for Nonimmigrant (F-1) Student Status 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. This form can only be issued or endorsed by the Designated School Official (DSO).
I-94 Card
DHS Arrival/Departure Record that the visitor receives upon entry to the U.S. A paper I-94 indicates Admission Number, Visa Type, place/date of admission to the U.S., and specific period of authorized stay (or duration of status– D/S).
I-766 Employment Authorization Document (EAD)
A Form I-766 Employment Authorization Document (EAD or EAD Card), known commonly as a work permit, is a document issued by the U.S. Citizenship and Immigration Services (USCIS) that provides temporary employment authorization to noncitizens in the United States.
Definitions
Individual Taxpayer Identification Number (ITIN)
An ITIN is a tax processing number only available for certain nonresident aliens and resident aliens, their spouses, and dependents who cannot get a Social Security Number (SSN). It is a 9-digit number, beginning with the number “9,” formatted like a SSN (9NN-NN-NNNN). A person may not use an ITIN instead of a SSN for employment.
Memorandum of Understanding
A legally binding document that sets forth the conditions of the fellowship between the foreign national and the University of Florida regarding their activities while at the university. This document indicates that fellowship payment(s) to the visitor are not for any services provided and that there is no employer-employee relationship.
Nonresident Alien
A nonresident alien (NRA) is an individual who is not a U.S. citizen or a resident alien. A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding.
In general:
- F and J student visa holders are considered non-residents during their first five full or partial calendar years in the U.S.
- J professors and researchers are considered non-residents during their first two full or partial calendar years in the U.S.
- H-1, TN and O-1 visa holders are considered non-residents until they meet the substantial presence test
Resident Alien
A resident alien is an individual that is not a U.S. citizen or national of the United States and who meets either the green card test or the IRS substantial presence test for the calendar year.
In general:
- F and J student visa holders are considered residents after five full or partial calendar years in the U.S.
- J researchers and professors are generally considered residents after two full or partial calendar years in the U.S.
- H-1, TN, and O-1 visa holders are considered residents once they meet the substantial presence test
Specially Designated Nationals and Blocked Persons (SDN) List
A list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, these individuals and companies are called “Specially Designated Nationals” (SDNs). Their assets are blocked and U.S. persons are generally prohibited against dealing with them.
Substantial Presence Test
A calculation of the number of days of physical presence in the U.S. during a three-year period (as described below) including the current calendar year. If the computed number of days for the three-year period is equal to or greater than 183 days, and the number of days in the current year is at least 31, then the foreign national has met the substantial presence test, and is a resident alien for tax purposes in the current calendar year.
The substantial presence test for a given calendar/tax year is computed by adding:
- All of the days of physical presence in the U.S. in the current calendar year
- One-third (1/3) of the days in the U.S. in the previous calendar year
- One-sixth (1/6) of the days in the U.S. in the second preceding year
When counting the number of days of physical presence in the U.S., any days during which the foreign national is considered an “exempt individual” are excluded from consideration. Being an “exempt individual” for the purposes of the substantial presence test does not mean exempt from paying tax.
Tax Treaties
The United States has income tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.
Last Reviewed
05/01/2020: reviewed content
Resources
Specially Designated Nationals and Blocked Persons List (SDN)
I-9, Employment Eligibility Verification, Information
Toolkits
UF HR Toolkits – Foreign Nationals
Contacts
Payroll Services: 392-1231
Disbursement Services: 392-1241