The policies and procedures outlined below discuss the proper method for paying nonresident aliens for services provided to Colby College as independent contractors and/or travel reimbursements to independent contractors and other foreign visitors. A nonresident alien independent contractor is a foreign visitor (who is not a U.S. citizen living abroad) who provides a service to Colby College but is not an employee. A common example of this type of payment is an honorarium paid to a foreign scholar who temporarily visits the U.S. to deliver a lecture.
The United States Citizenship and Immigration Services (USCIS), formerly the Immigration and Naturalization Service (INS), and the Internal Revenue Service (IRS) restrict the College’s ability to make payments to nonresident aliens. In order to ensure that payments to nonresident aliens are allowable under law, certain procedures must be carefully followed. Your cooperation is greatly appreciated and essential.
The IRS requires that a distinction be made in the manner that Resident Aliens and Nonresident Aliens are taxed. The general controlling principle is that Resident Aliens are taxed in the same manner as U.S. Citizens and Nonresident Aliens are taxed according to special rules contained in certain sections of the Internal Revenue Code (sections 871(a), 881(a), 1441 and 1442 among others). Under the tax residency rules of the Internal Revenue Code (hereinafter referred to as the Code), any alien who is not a Resident Alien must be a Nonresident Alien. An alien becomes a Resident Alien generally in one of two ways: (1) by being lawfully admitted to the United States for permanent residence under the immigration laws (Green Card test); or (2) by passing the Substantial Presence Test (a numerical formula that measures days of presence in the United States). It is very important that the residency determination be made prior to issuing payments to foreign visitors.
Generally, payments made to nonresident independent contractors are subject to a withholding tax of 30%, unless a tax treaty exists between the United States and the individual’s country of tax residency. Note that the country of tax residency may be a different country than the person’s country of citizenship. The individual must have an existing Social Security Number or Individual Taxpayer Identification Number (ITIN) on order to utilize any existing treaty benefits.
Individuals who are not U.S. citizens or permanent residents and who seek to enter the U.S. to work, study or visit must be admitted to the United States under the appropriate “visa status”. The person’s visa status will govern whether the College is able to make any payments to them and whether the person is prohibited from certain activities. In order to make this determination, all foreign visitors are required to fully complete a Foreign National Information Form and Form W-8BEN. Additional forms may be required depending on the visitor’s status.
Timely completion of all forms is necessary to ensure that the College is able to make prompt payment. If possible, please inform the Office of Financial Services at least 6 weeks prior that you will be inviting a foreign visitor to campus.
- Payments to Nonresident Aliens for services performed in the United States
- Payments to Nonresident Aliens for services performed outside the United States
- Common Terms and Definitions
- List of Contacts for Assistance