In an effort to simplify the guidelines for payments to Non-U.S. Citizens/Non-Employees, the following information has been compiled. Each situation can be different. If you have questions, contact Natasha Stover in Accounting Operations for help.
You have invited a Non-U.S. Citizen/Non-Employee to come to Penn State to interview for a position, participate in research, or give a lecture. Or, you are going to pay for travel expenses for a Non-U.S. Citizen/Non-Employee to another location. Now what? How do you pay them? What forms do you need to get them paid? Keep reading for some answers to these questions.
The Non-Employee Information (NEI) Form should be sent to the individual prior to travel, so it can be completed and returned to you before any payments need to be made. The completed form will let you know the Residency Status and what documents you will need to collect.
All Non-Employee individuals receiving payments from the University must have a NEI Form included with the backup documentation unless they mark in Section II "I AM A UNITED STATES CITIZEN". U.S. Citizens need no other documentation.
See the Non-U.S. Citizen Documentation Chart (VISA Chart) for guidance as to required documentation. Each Admission Classification requires particular supporting documentation prior to payment being made.
The NEI Form does not need to be an original, so it can be faxed, scanned or emailed.
The "Country of Residence" on the NEI Form is where the Non-U.S. Citizen lives and pays taxes, not necessarily their country of origin or passport issuance. The country of residence is used to determine documentation requirements and Tax Treaty eligibility.
Upon entrance into the U.S., an Immigration Officer may stamp an Admission Classification, entry date and "admitted until date" in the individual's passport. If the passport does not have this stamp, an electronic version will be available at the Department of Homeland Security website.
Some Admission Classifications allow for a stay of only 90 days. Others will show a designation of D/S, which means the Non-U.S. Citizen may stay in the U.S. for the Duration of Status. If so, as long as the individual remains in compliance with their current status, they may remain in the U.S. Duration of Status is usually seen for F-1 and J-1 students. If there is a specific date on the Admission Classification stamp, the University cannot make any payments for expenses incurred after that date.
The Admission Stamp must be legible. The date of entry, status at entry and authorized duration of stay are all needed to approve any payment to the Non-U.S. Citizen. Remember, your copy will probably then be faxed into the SAP Concur system and must continue to be legible for the approver to view.
The Admission Classification stamp must be obtained from the Non-U.S. Citizen, with the exception of residents of Canada or Mexico. Without a copy of the stamp, the University cannot make a payment to, or on behalf of, the Non-U.S. Citizen.
The U.S. Customs and Border Protection Agency has a program for VISA WAIVER Non-U.S. Citizens (WB and WT designations). Prior to traveling to the United States, visitors from VISA Waiver countries may apply to obtain a travel authorization using ESTA. This is a prequalifying system which includes information previously obtained on the I-94W form.
Non-U.S. Citizens entering the U.S. under the ESTA program will receive an Admission Classification stamp in the passport, with the entry date and duration of status.
You should send the Non-U.S. Citizen an official letter of invitation. This may be needed for the individual to enter the U.S. with the correct Admission Classification. Non-U.S. Citizens entering under business status (B1/WB) will need a letter to document that they are entering for business purposes.
The J-1 status is "sponsor specific," meaning there are some restrictions regarding honorarium payments. If you are paying an Honorarium or Professional Service to a Non-U.S. Citizen who is already in the country under a J-1 Scholar/Researcher status with another sponsor, the individual will need a letter of invitation, as well as a letter from your department to the Responsible Officer of the J-1 Exchange Visitor Program asking permission for the individual to come to Penn State and receive the payment. The Officer must then send an Authorization Letter to your department granting permission under the J-1 program for their visit and payment. A sample Authorization Letter is available on this website for convenience. The Authorization Letter must be part of the backup documentation for payment.
The J-1Scholar/Researcher status only requires an Authorization letter for payments of the 1099 purposes (Honorarium, Profession Services, etc.).
The J-1 STUDENT status never requires the Authorization letter.
All J-1 Visitors must supply a copy of their Certificate of Eligibility for Exchange Visitor (J-1) Status (called the DS2019 form) in addition to the NEI form and Admission Classification Stamp.
The W-9 form is required when you are paying income, such as a 1099 Honorarium or Professional Service, to a Permanent Resident, or a Resident for Tax Purposes. It is not required for Expense Reimbursement payments. When the W-9 form is required, it must be uploaded into PaymentWorks as part of the registration process. See the Office of Central Procurement website for complete details.
A copy of the VISA is never required as backup documentation. The VISA is not "trip specific" and not used as documentation for reimbursement of travel or 1099 payments. There are more than 30 countries that participate in the VISA WAIVER program and a VISA is not required for Non-U.S. Citizens from those countries to enter the United States. Those Non-U.S. Citizens will enter the United States with just an Admission Classification Stamp.
A Non-U.S. Citizen can enter the United States under a particular status, and then change the status while in the United States, or extend the period for which they are authorized to be in the United States. When either of these situations occurs, they will receive an I-797A, Notice of Action form from the Department of Homeland Security. The form will show the new classification or valid period allowed.
This form is an 8 1/2 x 11 page which is usually folded and stapled into the passport. We need to have a copy of the full page.
If the University pays "on behalf" of the Non-U.S. Citizen (such as a P-card payment) for travel costs, such as airline or hotel, departments are still required to collect documentation from the Non-U.S. Citizen as if the University were paying them directly. The documentation should be included with the travel backup in SAP Concur.
For payments of a 1099 Honorarium or External Service, there are requirements and forms, in addition to those needed for travel reimbursement, which you will need to collect from the Non-U.S. Citizen.
Note: Individuals with an H-1B Visa may not receive 1099 payments unless they have an Employment Authorization Document (EAD card).
If the payee is a Permanent Resident, a W-9 form is required in addition to the NEI form. The W-9 form must have a Social Security Number on it and be signed and dated.
If the payee is a Resident for Tax Purposes, a W-9 form and a copy of the Admission Classification Stamp are required, in addition to the NEI form. It is up to the payee to determine if they are a resident for tax purposes, as it is based on a Substantial Presence Test.
If the payee is a Non-Resident for Tax Purposes, a copy of the Admission Classification Stamp is required in addition to the NEI form. This status also requires determination of Tax Treaty Exemption or Tax Withholding. The United States has Tax Exemption Treaties with many countries. Consult the Treaty List for Individual Personal Services, which is the designation under which all 1099 payments, External Services and Honoraria) to Non-U.S. Citizens are classified when paid through Accounting Operations.
Note: Do not use the Treaty List for Individual Personal Services for determinations involving International Student Employees, as those determinations are "employment-related", handled through the Payroll Office, and made using a different type of list.
To qualify for Tax Treaty Exemption, the Non-U.S. Citizen must be from a country with which the United States has a treaty and they must have a U.S. TAX ID number - either a Social Security Number or an Individual Taxpayer Identification Number (ITIN) - which MUST be supplied to you in a secure manner. Non-U.S. Citizens entering the United States with a B1/WB or B2/WT status cannot apply for a Social Security number. They may apply for an ITIN.
If the Non-U.S. Citizen meets this criteria, the Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, known as the Form 8233, needs to be completed and submitted with the other required backup.
Form 8233 is an IRS document and is available on GURU, or from the IRS web site. This form must have an original signature and cannot be faxed, or copied once it is signed. The form is sent to the IRS by Accounting Operations.
All fields on the Form 8233 need to be completed, with the exception of item 10 and items 13 - 18. Make sure the payee signs the form on the "SIGN HERE" signature line above section IV.
If the Non-U.S. Citizen is not eligible for Tax Treaty Exemption, Federal Income Tax at the rate of 30% must be withheld from the 1099 payment. This must be done when the Non-PO Invoice is processed by the department. If the Non-U.S. Citizen does not have a SSN or ITIN, the SSN field is completed using 111-11-1111. The 30% tax amount is supplied on the Withholding tax tab of the Non-PO Invoice and will be posted to General Ledger account 21500800. Your cost object amount will be the full amount of the payment prior to taxes (Screenshot #1) and the net of the two amounts is what the Vendor will receive (Screenshot #2).
If your cost object has funds available, the Department may elect to "gross-up" the Non-PO Invoice payment to have the cost object cover the tax amount. This will permit the Non-U.S. Citizen to receive the full payment amount. To calculate this correctly, take the amount you want the payment to be and divide it by 70%. This will give you the amount of the payment with the 30% tax included.
Example: for a $1,000 honorarium payment, divide $1,000 by 70% ($1,000 ÷ .70) and the amount is $1,428.58. This is the gross amount of the vendor amount and taxes due. To check the amount, multiply $1,428.58 by 30% and that should be the tax amount. The $1,428.58 will post to your budget line and will be recorded on the Withholding Tax Base (W/Tax Base FC). The $428.58 will be recorded on the Withholding tax tab as the Withholding Tax Amount (W/Tax Amt in FC) and the net amount of $1,000 will be what the vendor is paid.
$1,000.00 ÷ 70% = $1,428.58
$1,428.58 x 30% = $ 428.58
Two screen shot examples with tax withholding:
Penn State complies with the Department of Homeland Security and Internal Revenue Service laws and regulations governing payments to Non-U.S. Citizens. There could be substantial fines imposed if, during an audit, proper documentation was not provided for these payments. Some visitors may complain about the requests for documents, but we must comply with what is required by law.
The Department of Homeland Security and the Internal Revenue Service do change the laws and regulations occasionally. This site will be updated as we become aware of changes. It is recommended that you check this site periodically for updates. Also, the Non-Employee Information form, Treaty Chart and other documents may change on occasion. Please make sure you are using the most current version of these forms available through this site.
202 James M. Elliott Building
120 South Burrowes Street
University Park, PA 16801-3857