University of Minnesota
Office of Human Resources
http://www.umn.edu/ohr
612-625-2016

Paying Nonresident Alien Contractors/Payees

Overview

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:

  • Consultations
  • Flat payments for living expenses
  • Lectures
  • Live performances
  • Participation in scientific, educational, professional or business conventions, conferences or seminars
  • Research
  • Other services on a short-term, contract basis
  • Reimbursement of lost income and other payments
  • Royalties
  • Business expense reimbursements

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.

  • Lodging and travel expenses paid on a short-term basis, including per diem amounts paid for meals and incidentals, are not subject to tax withholding and reporting as long as they are substantiated business expenses following IRS "accountable plan rules" used to reimburse employee business expenses. For more information see University Policy 3.8.3 - Traveling on University Business.

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.

Contractor Work Eligibility, Payment Process, and Tax Requirements

Information on the following topics is provided as an aid when paying nonresident alien contractors.

Visa Status Requirements for Short-term Foreign Visitors

Restrictions on Payments to Short-term International Visitors (B-1, B-2, WB and WT Visas)

Tax Treaty Eligibility for Nonresident Alien Independent Contractors

Nonresident Alien Contractor Payment Processing Requirements

Individual Taxpayer Identification Number (ITIN)

Frequently Asked Questions about ITINs and Social Security cards