Payments to Foreign Nationals Policy and Procedure Perspectives for Business Offices Business Manage

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Payments to Foreign NationalsPolicy and
Procedure Perspectives for Business
OfficesBusiness Managers Group Working
SessionMarch 21, 2006
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Objectives of this Session

• Highlights - Critical Information
• OBFS Web Site
• Payment Scenarios
• Questions
• Working Together to Resolve Issues

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Critical Information

• First Questions to Askfor Non-employee Visitors
• What type of visa does the visitor have/will the
  visitor have?
• Certain visas restrict certain or all types of
  payments. Dont let your faculty or department
  head make a promise you will not be able to
  fulfill!
• Your department may need to sponsor the visitor
  on a different type of visa than he is planning
  to travel on depending upon how long he is
  staying and what type of payment you need to make
  to him or on his behalf.

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Critical Information

• First Questions to AskFor Non-employee Visitors
• What type of payment to (or payment on behalf of)
  the visitor is going to be made?
• Payment for Services
• Much more documentation than for reimbursement of
  expenses.
• The individual must have a SSN or ITIN or must
  have proof of application being filed.
• The individual may apply for SSN or ITIN while in
  home country, but must send in original
  documentation or copies certified by issuing
  agency or notarized by U.S. notary public legally
  authorized within his or her local jurisdiction .
  While in US, he/she may apply for an SSN at
  local Social Security office or may apply for
  ITIN at Payroll Office (if not eligible for SSN).
  Actual number will not be issued for
  weeks/months.

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Critical Information

• First Questions to Askfor Non-employee Visitors
• What type of payment to (or payment on behalf of)
  the visitor is going to be made?
• Payment for Services (continued)
• Taxes of 33 will be withheld from the payment
  unless there is a tax treaty, and the individual
  applies for treaty benefits (IRS Form 8233). The
  individual must go to the Payroll Office, in
  person, to file for treaty benefits. Schedule
  appointments as early as possible!
• The IRS does not allow treaty benefits until an
  ITIN or SSN is reported. There is a 10 day
  waiting period after the ITIN or SSN is supplied.
  

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Critical Information

• First Questions to Askfor Non-employee Visitors
• What type of payment to (or payment on behalf of)
  the visitor is going to be made?
• Payment for Services (continued)
• If the SSN or ITIN is applied for, and the
  payment is processed before the SSN or ITIN is
  issued, taxes will still be withheld from the
  payment even if tax treaty benefits have been
  applied for. The Payroll Service Center will hold
  the 8233 until the ITIN is received and forward
  the form to the IRS.  After the Service Center
  forwards the form, they must wait 10 days before
  they make the payment -- to give the IRS time to
  review and reject the benefit, if applicable
  (none has ever been rejected). Business Offices
  must hold the request for payment until the
  individual has received the SSN or ITIN to ensure
  taxes will not be withheld from the payment.

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Critical Information

• First Questions to Askfor Non-employee Visitors
• What type of payment to (or payment on behalf of)
  the visitor is going to be made?
• Reimbursement for Expenses
• Lodging reimbursed at same rate of employees in
  travel status.
• Meals may be reimbursed at actual of per diem
  (same as employees in travel status).
• Reimbursements must be filed within 60-days of
  date expenditures occurred to meet Accountable
  Plan requirements, or will be taxable income.

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Critical Information

• Important Considerations for Payments to
  StudentsNon-employees
• Awards
• No restrictions on use of the money.
• Submit a voucher for the payment.
• Be sure to indicate, on the voucher, that the
  payment is an award with no restrictions for use.
  
• Tax is withheld at 30 for Federal and 3 for
  State unless the unit grosses up the award to
  pay the taxes on behalf of the student.

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Critical Information

• Important Considerations for Payments to
  StudentsNon-employee
• Scholarship PaymentsPayments Primarily for the
  Benefit of the Student.
• Process payment through Student Accounts
  Receivable, Financial Aid, or DAWS.
• Scholarships can be qualified or non qualified.
• Students receiving payments through SAR are sent
  a questionnaire. Their answers determine if the
  payment is qualified or non qualified.
• If a payment is non qualified, withholding and
  reporting is required. University Payroll will
  gross up the amount (the unit will pay the taxes)
  and report it on a 1042S.
• If a payment is qualified, there is no
  withholding or reporting required. 

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Critical Information

• Important Considerations for Payments to
  StudentsNon-employees
• Scholarship Payments (continued)
• From the IRS web site FAQs
• A qualified scholarship is defined as any
  amount expended for "qualified tuition and
  related expenses." Qualified tuition and related
  expenses are tuition and fees required for the
  enrollment or attendance of a student at an
  educational institution, fees, books, supplies
  and equipment required for courses of instruction
  at such educational organization. Refer to
  Publication 970, Tax Benefits for Education, and
  Publication 15, Circular E, Employers Tax Guide,
  for more information. 
• Reimbursement of travel expenses would NOT likely
  be qualified payments since they are not
  "required" to be enrolled.

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Critical Information

• Important Considerations for Payments to
  StudentsNon-employees
• Reimbursement of Expenses Incurred Primarily for
  Benefit of the University
• Submit on Voucher to Payroll.
• Clearly identify expense as being made for
  primary benefit of the University provide
  detailed explanation.
• Submit the Tax Reporting and Withholding
  Checklist for Foreign National Reimbursements as
  proof of the primary benefit to the University.
• No reporting or withholding required.

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Critical Information

• Payments Made On Behalf Of a Foreign National
• The unit must retain, in its own files, all of
  the documentation that it would have needed to
  send to Payroll if requesting a reimbursement for
  the foreign national. Even if a Foreign National
  attends a dinner paid for by your unit, you need
  this documentation in file.
• If the payment is primarily for the benefit of
  the foreign national, not the University, the
  payment may be reportable (to the IRS) and may
  require withholding or grossing up of the
  payment for taxes. At this time, there is no form
  or procedure in place for units to report this
  information to Payrollas there is for a
  reimbursement.

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OBFS Web Site

• Live Review of Site Structure

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Scenarios

• See Handouts

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Questions Concerns

• Requirement for all foreign vendors to fill out
  W-8Ben and/or W-8ECI forms. 
• New requirement for all foreign "entities."
• Recently discovered requirement by Payables.
• No notification to units via e-mail or update to
  Web Site.

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Questions Concerns

• 2.  Errors on OBFS Web Site
• Under required documentation for J1 Visa holders,
  and a few others, it read that an EAD (Employment
  Authorization Document) is needed for
  reimbursements. This is not true if the
  individual has a passport and an I-94 which
  applies to most if not all individuals seeking
  reimbursement. forms not needed as indicated
• Payroll acknowledged this was an error and made
  the correction.
• Given the complexity of the requirements, errors
  may occur in information provided, even with
  several levels of review. Please report
  questions and concerns to Laurie Pitner
  (pitner_at_uillinois.edu) or Laura Barnett
  (barnett_at_uillinois.edu).
• Concern about over-conservative approach by U of
  I versus other universities if you check other
  sites, you will see all have similar rules (some
  do a better job of explanation than others).

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Questions Concerns

• Signature Requirement for Travel Reimbursement
  Form
• The traveler has typically returned home before
  submitting ticket for reimbursement.
• Travel Reimbursement forms are not accepted
  without a signature, and special permission is
  needed for a fax signature. This creates a lot of
  work and time faxing the form back and forth with
  the possibility of it being lost. 
• What solutions might we have to ease this burden
  for everyone?

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Questions Concerns

• Exception Form for Reimbursements Filed over
  60-day Limit
• This form is geared totally for employees
  a new form is needed for non-employees foreign
  nationals and others.
• Reimbursements sent to Payroll being returned to
  unit for routing back to Payables.

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Working Together to Resolve Problems

• Need for University to Review Centralization of
  Payment Processing for Foreign Nationals too
  complicated for units who have only occasional
  payments.
• Send concerns to Laurie Pitner (pitner_at_uillinois.e
  du) or Laura Barnett (barnett_at_uilliois.edu) if
  you think there are errors in OBFS Web Site
  pages.
• Remember everyone is trying to do his/her job
  no one is purposefully making your life
  difficult. The IRS and USCIS have made these
  complicated regulations the University is doing
  what it needs to do in order to comply.

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Other Questions and Concerns?
Presentation by Maxine Sandretto Director of
Budget and Resource Planning, College of Law BMG
Liaison to the Foreign Nationals Advisory Group
2004-2005