Paying Foreign Nationals

1
Paying Foreign Nationals

• Karen Klein, CPP
• HRMS/Payroll Services
• Phone[phone]
• Fax[phone]
• k-klei_at_umn.edu

2
OVERVIEW

• Discussion of employment authorization, and tax
  issues surrounding international students,
  scholars, and visitors to the University of
  Minnesota
• Information on terms and definitions, IRS
  Regulations, reports
• Useful web sites

3
IRS TERMS and DEFINITIONS

• Resident
• Meets green card or substantial presence
  test. See IRS Publ. 519 - US Tax Guide for Aliens
• U.S. Person
• (cf. IRC 7701(a)(30) and Treas.Reg.
  1.1441-1(c)(2))
• US citizen individual, resident alien individual,
  US corporation, US partnership, US partner, US
  trust, US estate, US government, State
  government, government of District of Columbia,
  and any other person who is not a foreign person.

• Nonresident
• A non US citizen does not meet green card test
  or the substantial presence test
• Foreign Person
• (cf. Treas. Reg. 1.1441-19(c)(2))
• Nonresident alien individual, foreign
  corporation, foreign partnership, foreign
  partner, foreign trust, foreign estate, foreign
  government, foreign branch of a US person,
  international organization ,and any other person
  who is not a US person.

4
CONTRACTOR COMMON VISA STATUS OPTIONS

• B1-B2/WB-WT
• Short-term visitor for business or tourism
• If receiving honorarium follow 9-5-6 rule
• (No more than 9 days here, paid by no more than 5
  other institutions, in the last 6 months)
  http//www1.umn.edu/ohr/payroll/international/cont
  ractors/b1restrictions.html
• J-1
• Short-term scholar, researcher, professor, etc.
• Sponsor authorizes payment
• If not sponsored by U of M, need letter of
  authorization from sponsor for the specific
  activity is required.
• H-1B
• Only expenses if authorized by petitioner
• See the following web sites
• http//www.isss.umn.edu/Departments/VisaOption.htm
  l
• http//www1.umn.edu/ohr/payroll/international/cont
  ractors/visa.html

5
EMPLOYEE STUDENT VISA STATUS OPTIONS

• F-1 and J-1 Students
• F-1 Student Can work on campus without any
  special permission if on a U of MN I-20 or have
  transferred to the U of M.
• J-1 Student Always need to obtain their program
  sponsors permission to work.
• Both F-1 and J-1 students limited to part-time
  work (no more than 20 hours/week) during the
  semester can work full-time during official
  school breaks.
• F and J students are not allowed to work
  on-campus beyond completion without work
  permission.

6
EMPLOYEE NONSTUDENT VISA OPTIONS

• J-1 Scholar
• If U is not the sponsor, then DS-2019 must
  include U of MN as site of activity
• Funding on DS-2019 must include the amount of
  payment in All other organizations providing
  funding section
• H-1B Initiated by employer
• TN For Canada or Mexican citizens

7
F J VISA HOLDERS

• SEVIS Student and Exchange Visitor Information
  System
• SEVIS Reporting Requirements
• Hosting departments do NOT report directly to
  SEVIS
• ISSS reports to SEVIS
• Departments can help by reminding F and J visa
  holders of the requirements
• See ISSS website at http//www.isss.umn.edu/

8
TAX ISSUES - CONTRACTORS

• Sourcing Income
• IRS Reg. 1.441-1 Actual Knowledge
• Visa Status
• Payments Tax at 30 unless Tax Treaty Eligible
• Honoraria
• CFPS fees for service
• Participant/Research Subject payments
• Royalties
• B1/WB Rules and Certification
• ITIN Must ASK for TIN
• Expense Payments Accountable Plan Rules
• What do you forward to Payroll?
• B1/WB Honoraria Expense Form
• Copies of Expense Reimbursement substantiation
• ITIN and Tax Treaty related Documents
• http//www1.umn.edu/ohr/payroll/international/cont
  ractors/index.html

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- CONTRACTORS -TAX TREATIES

• Independent Personal Services - Term commonly
  used in Tax Treaties, associated with services
  performed where no employer/employee relationship
  exists.
• Examples of Treaty eligibility
• Teaching and Research
• Dependent Personal Services
• Studying and Training
• Treaty Limits
• Scholarship/Fellowship (living expenses for
  independent research)
• Must have SSN or ITIN
• Completing the right Form
• Form 8233 Affidavit - Nonresident (foreign
  person)
• Form W-9 Affidavit Resident (US person)
• Form W-8BEN Royalties, Scholarships,
  Fellowships
• http//www1.umn.edu/ohr/payroll/international/cont
  ractors/tax.html
• http//www1.umn.edu/ohr/payroll/international/taxt
  reaty.html

10
CONTRACTORS ITINs

• Individual Taxpayer Identification Number
• Issued by IRS
• Cannot be used for employee compensation
• If no SSN, then MUST have to be eligible for
  treaty benefits from the U
• IRS Form W-7
• May need to go to SSA before IRS
• http//www1.umn.edu/ohr/payroll/international/itin
  .html

11
- CONTRACTOR - QUESTIONS???

• What type of visa status is needed for a foreign
  national being paid a fee or honoraria and/or
  travel expenses?
• http//www1.umn.edu/ohr/payroll/international/cont
  ractors/visa.html
• What type of document is used to process these
  payments?
• What is needed for supporting documentation?
• Is this a paper or electronic process?
• What about Expenses? Are they taxable?
• http//www1.umn.edu/ohr/payroll/international/cont
  ractors/pay.html

12
- CONTRACTOR - QUESTIONS???

• What object/expense codes are used?
• http//www1.umn.edu/ohr/trainingservices/financial
  /reference/modules.html
• http//purchasing.umn.edu/index.php
• If honorarium/fee is 3,000 or more, should a CPS
  be included as supporting documentation?
• No - Not if CPS was generated through FFN

13
- CONTRACTOR - QUESTIONS???

• How do I know when I am paying a foreign
  national?
• Contractor Complete the Data Collection sheet
  and ask (Departments are often involved in
  bringing the visitor into the country to perform
  the service)
• http//purchasing.umn.edu/forms/cfps.php
• Employee Check the I-9 (Normally the department
  is involved in bringing J-1 and H-1B visa holders
  to the country
• http//www1.umn.edu/ohr/payroll/international/i9.h
  tml

14
- CONTRACTOR - QUESTIONS???

• When making multiple trips, should a foreign
  national get a SSN or ITIN?
• To get a SSN, person must have a job.
• http//www1.umn.edu/ohr/payroll/international/ssn.
  html
• Can apply for an ITIN for various reasons,
  checked on W-7 application.
• http//www1.umn.edu/ohr/payroll/international/itin
  .html

15
PAYROLL SERVICES WEB SITEScholarship
Fellowship Payments

• Nonresident Alien Scholarship Fellowship detail
  See International Students, Scholars
  Visitors, Scholarship and Fellowship Grant
• http//www1.umn.edu/ohr/payroll/international/scho
  larship.html
• General Q A See Scholarship Fellowship
  Department Aid
• http//www1.umn.edu/ohr/payroll/scholarship.html

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PAYROLL SERVICES WEB SITEwww.umn.edu/ohr/payroll
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PAYROLL SERVICES WEB SITEInternational Students,
Scholars, Visitors
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PAYROLL SERVICES WEB SITEIndependent Contractors
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WEB SITE TO BOOKMARK

• Payroll Services
• www.umn.edu/ohr/payroll
• Other sites available for Nonresident Alien
  information
• International Student Scholar Services
• www.isss.umn.edu
• Employee Self Service Pay Taxes
• http//hrss.umn.edu

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Contact for questions

• Human Resources Call Center
• 612-625-2016
• International Student Scholar Services (ISSS)
• 612-626-7100
• Financial Systems Support Helpline
• 612-624-1617
• Purchasing Services
• 612-624-2828