When making payments to non-resident aliens (NRA’s) for services, honorariums and/or associated travel expenses, you must determine whether it is legal to pay them, is the payment subject to tax, and what policies and procedures must be followed.
Note: It is the sponsoring department’s responsibility to ensure that their foreign national visitor has been pre-approved for payment by Payroll Services prior to making formal arrangements for any kind of payment. It is also the foreign national visitor’s responsibility to ensure that they obtain the proper visa prior to their U.S. arrival, so JMU may legally pay them.
The most common types that allow for compensation are B-1 (business visitor), B-2 (tourist visitor), WB (business visitor), WT (tourist visitor), and occasionally J-1 visa holders**.
The B-1, B-2, WB, and WT visa holder can be paid for services/honoraria only if they are providing “usual academic activity” at the University no longer than 9 days and have not accepted payment or expenses from more than 5 institutions in the previous 6 month period (9-5-6 rule).
“Usual academic activity” includes such things as lecturing, teaching, consulting, or otherwise sharing knowledge, experience, or skills in master classes, and performances that are open to the general public, free of charge. Additionally, they must sign a Substitute W-8 form certifying that they meet the “honoraria eligibility” criteria. Visitors that are to receive honoraria that exceed the 9-5-6 rule will need to get a J-1 visa via the Office of International Student and Faculty Programs.
Canadians admitted without an I-94 card are considered to be visitors for pleasure (B-2 tourist visa holders).
**J-1 visa holders may receive payments for occasional lectures and/or consultations. However, before we can compensate a J-1 Exchange Visitor sponsored by another University, we are required to have prior written authorization from that University's "responsible officer" such as their International Advisor; permission letters from academic departments are not acceptable for this purpose.
All other visa types must be authorized by the Office of International Student and Faculty Programs and Payroll Services prior to offering compensation for services, honorariums and/or travel expenses, as there are visa types that JMU cannot legally pay.
Payments to NRA's are subject to federal income tax withholding at 30% unless specifically exempted by an income tax treaty. There are tax treaties with over 45 countries. Each treaty is unique. To claim a tax treaty exemption, the IRS requires the NRA to have either a U.S. Social Security Number (SSN) or U.S. Individual Taypayer Identification Number (ITIN) and submit a completed Form 8233 prior to payment. If not exempted by a tax treaty, taxes must be withheld.
Prior authorization is required before any direct billing arrangements are made and/or any pre-payments for expenses using a department’s small purchase card*. Reference Policy 4215 Travel for new Travel Authorization rules regarding foreign national/non-resident visitors.
B-1/WB visa holders (business visitors) may be reimbursed for reasonable travel and incidental expenses incurred in connection with a usual academic activity/service, regardless of the duration of the activity and regardless of whether the individual has previously received payment from other institutions.
B-2/WT visa holders (tourist visitors) may be reimbursed for reasonable travel and incidental expenses incurred in connection with a usual academic activity/service not exceeding 9 days in duration, provided that the individual has not received travel and incidental expenses from more than 5 institutions in the previous 6 months (9-5-6 rule).
*NOTE: In order for a travel expense reimbursement to be exempt from tax, a business purpose is required. Therefore, the primary purpose of the U.S. visit is very important. If the primary purpose of the U.S. visit is business, and you acquire itemized travel related receipts, then JMU can reimburse the expenses under the Accountable Plan tax free. Eligible expenses may include airfare, hotel and other travel related expenses. If the primary purpose of the U.S. visit is NOT business, then JMU can only reimburse those costs that relate to the business purpose (i.e. meals and lodging at JMU, travel within the U.S. to get to JMU, etc..), but not airfare from the visitor’s foreign address to the U.S. (that would be considered tourist/personal).
Sherry Willis in Payroll Services will perform a tax analysis and assist in the completion of the Form 8233 (if applicable). She will also authorize all non-resident travel reimbursements and/or honorarium payments to foreign national visitors. In order to perform a tax analysis and approve payment(s), the following information is needed:
If an individual does not have a SSN and is not eligible to receive a SSN, then the individual must have or apply for a W-7 Individual Taxpayer Identification Number (ITIN).
Additionally, if the University agrees to pay an honorarium and/or associated travel expenses for services, the IRS requires that the NRA complete a W-8 form (a Substitute W-8 Form will be used by JMU) and file a US tax return using the 1042S form that will be sent by the University at year-end.