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Taxation of Foreign Nationals

July 15th, 2009

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So Why is it so Important for a Foreign National to Meet with

the Tax Specialist?• Foreign Nationals have a special set of tax guidelines that they must

follow.• Not being in compliance not only puts the University at risk of very

large penalties and fines, but also can jeopardize the foreign national’s visa status.

• In February of 2009 the American Recovery and Reinvestment Act of 2009 increased the taxable liability for Foreign Nationals.

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Types of Taxable Compensation

WagesAssistantshipsScholarshipsFellowships

StipendsTravel Reimbursements

Housing AllowancesHonoraria

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What’s New• Recently accounting has updated their travel procedures and website

which is helping us identify those individuals that may fall under the parameter of the "travel grant" definition.

• According to the IRS Rev. Proc. 88-24, which is also explained in IRS Publication 515, taxable scholarships (i.e. “travel grants”) of NRA recipients in F, J, M, or Q status are subject to tax at a rate of 14%.

• Some travel reimbursements fall under the definition of “travel grant” and may be subject to taxes.

• Please contact the Foreign National Tax Specialist or Milburn Holbrook (milburn_holbrook@ncsu.edu) in accounting before entering the travel voucher.

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What’s NewAs the new withholding tables were developed due to changes to the tax

law made by the American Recovery and Reinvestment Act of 2009, the amount to add to a nonresident alien employee's wages for calculating income tax withholding only has been increased.

Payroll Period Add Additional Biweekly $276.00 Monthly $598.00 Annually $7,180.00   

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Common Errors & Friendly Reminders

• F-1 visa holders can not be paid on a flat rate.• Please remember that B-1 visa holders can not be paid through

payroll. Please refer to your Visa Matrix for more information.• W-4 and NC-4 forms do not need to be completed at the

department level. The Foreign National will complete these forms with me during their appointment.

• Most Foreign Nationals are exempt from FICA. They will not receive that exemption automatically unless they meet with the Foreign National Tax Specialist.

***This may impact your budget.***

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Common Errors & Friendly Reminders

• You are not able to pay F-1 and J-1’s from other Universities without special handling and permissions from the host University. This includes travel reimbursements.

• You are required to collect various documents and have written permission from the host University for them to be on the NC State campus. This includes NCSU sponsored conference. Failure to comply can cause immigration compliance issues with the foreign national’s visa.

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Honoraria Payments• An honorarium is a fee that may be paid to an international speaker

who meets all of the following criteria:• The visit to the N C State University campus is equal to or less than 9

days, and visitor to the campus has not accepted payment from more than five institutions or organizations in the previous six month period.

• The visitor should be on a B visa or VWB – visa waiver (Canadian visitors - passport only)

• Note: Honoraria fees are subject to a 30% federal income tax withholding (34% if > $1,500).

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Contact InformationMichelle Anderson

Foreign National Tax Specialistmichelle_anderson@ncsu.edu

Please view our website for helpful information about Foreign National Taxation

http://www.fis.ncsu.edu/hr/payroll/fntax/

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Questions?