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Eligibility for a nonresident alien (i.e. foreign national) to receive compensation from an U.S. source depends on the person's visa status (to be discussed in Visa Status Requirements for Short-term Foreign Visitors). Also see details information on Visa options for hiring international visitors at the ISSS web site. Compensation, including honorarium, for professional or contractor services include (but is not limited to) the following services or payments:
International scholars and visitors who receive any of these payments are generally subject to 30% federal tax withholding, unless the amounts are either exempt under the terms of a tax treaty, subject to a lower, or reduced tax rate under the treaty, or exempt from tax under the Internal Revenue Code. For more details see the topic entitled Tax Treaty Eligibility for Nonresident Alien Independent Contractors.
All U.S. source payments, except those exempt from tax under the Internal Revenue Code (i.e. substantiated business expenses) made to or on behalf of, nonresident alien contractors MUST be reported on IRS Form 1042-S.
NOTE : Compensation paid for services performed by nonresident aliens outside the United States is not subject to 30% withholding, and not reported to IRS.
Information on the following topics is provided as an aid when paying nonresident alien contractors.