Title: Non-Resident Alien Procedures
Effective Date: 11-20-2006
Issuing Authority: Investment & Tax Compliance Analyst
Contact: Payroll at 507-786-3299
Last Updated: 07-17-2019
Purpose of Procedures
These procedures cover the payment and/or taxable expense reimbursement to an individual who is a Non-Resident Alien (NRA) or Foreign National. The College’s ability to pay and determine the tax status of the individual depends upon their specific tax and immigration information. The individual will provide this information by using our international tax software, Glacier (a product of Arctic International, LLC), which may be accessed over the Internet.
Glacier is a system used to gather tax and immigration information about individuals. It may be accessed over the web using a user name and password provided by the Business Office. Based upon the information provided, the system will determine whether the College may pay or reimburse expenses for this individual under his/her certain visa type, and whether any taxes are required to be withheld. The department is responsible for ensuring that the individual completes the information in the Glacier system before requesting payment. All requests for payments must also follow the College Accounting Procedures.
Who needs to know these Procedures
These procedures apply to all St. Olaf faculty, staff, and students.
Procedures and Definitions
Departments must immediately notify the NRA tax accountant upon becoming aware that a foreign national will be coming to St. Olaf and provide information on payments or reimbursements he/she is seeking.
If the payment is for expense reimbursement only, the NRA tax accountant will determine if it is taxable, and if it’s not, it will be noted on the expense payment or check request and no further reporting is necessary. If the expense reimbursement is taxable, the department will need to proceed as if they are making a payment to the Non-Resident Alien.
Before completing a payment request for a Non-Resident Alien or Foreign National, the department should forward an email to the Payroll Office requesting the Glacier login information be emailed to the individual. The department should provide the Payroll Office with the full legal name and email address of the individual. The individual will then receive an email from St. Olaf College providing a user name and password which they can use to access the Glacier website and complete the required information. They will need to know their visa type and information regarding prior visits to adequately fill out the questions.
Using the information provided, the Payroll Office will then make a determination on whether the College may pay the individual, and if there is a withholding requirement.
Once the Business Office has determined that the individual may be paid, an appointment must be made for the Payroll Office to meet with the Non-Resident Alien to complete the required paperwork and copy the passport and other required documents. This meeting is done by appointment only and should be scheduled at least one week in advance whenever possible. Other arrangements can be made to provide these copies, but they must be coordinated directly with the Payroll Office. After Payroll has gathered the necessary paperwork, the request for payment can be made.
To request a payment, the authorized individual of the department should:
- Complete a Check Request Form with all required information including address.
- Sign the Check Request Form indicating approval for payment.
- Attach appropriate documentation detailing the service provided and rate.
- Have the Payroll Manager approve the check request; indicating what tax withholding is required.
- Forward to the Accounts Payable Office for processing.
Please allow 7-10 business days for invoice processing.
Business Expense Reimbursements (travel, food, and lodging)
If the individual is providing a service and has a business purpose, it is possible that they will fall under St. Olaf’s accountable plan for expense reimbursements. This means that if receipts and documentation are provided to the Business Office, the expense reimbursements will not be considered income to them and will not need to be reported or subject to tax withholding.
- Typically, students and scholars do not fall under the accountable plan, because they are not here for a business purpose or providing a service. Those expenses would be considered taxable income and would need to follow the procedures above for payment to a Non-Resident Alien.
- The accountable plan does not apply to expenses for spouses and dependents. Those expenses would be considered taxable income and would need to follow the procedures above for payment to a Non-Resident Alien.
B-1/B-2 Visa Visitors
Visitors with a B-1/B-2 Visa do not have work authorization but may receive an honorarium payment for academic activities lasting no more that nine days at a single institution, if the individual has not accepted such payment from more than five institutions during the previous six months (9-5-6 rule). If these criteria are not met, they may receive expense reimbursements, but only if original receipts are provided, they are providing a service, and have a business purpose.
Information Regarding the Withholding of Tax on Non-Resident Aliens
U.S. tax law is very complex, especially in regard to taxation of Non-Resident Alien individuals. Section 1441 of the Internal Revenue Code and Section 1.1461-2 of the Treasury Regulations, set forth the withholding and reporting requirements for payments to non-resident individuals. The following are the most basic rules regarding foreign payments:
- All payments to (or on behalf of) Non-Resident Aliens are taxable at 30 percent unless a special exception applies AND the individual has either an SSN or ITIN.
- In some situations, such as scholarships to NRA’s in F, J, M, or Q status, the tax will be 14 percent, if the individual has a valid SSN or ITIN.
- The alien may qualify under a treaty for the reduction or exemption of tax, providing they meet the criteria and have either an SSN or ITIN.
- Non-Resident Aliens receiving taxable payments must be issued a Form 1042-S by March 15 of the following year. This information must also be reported to the Internal Revenue Service. The 1042-S must include a valid tax id number.
- Non-Resident Aliens receiving taxable payments are required to file a U.S. tax return.
- Non-Resident Alien Tax Withholding on Excess Scholarships Frequently Asked Questions
All tax information provided hereby St. Olaf College is general in nature and cannot be relied upon to address specific situations. Please consult a tax advisor if you have concerns about your tax situation.