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[ Tax and International Operations ]

Foreign Nationals

Comptroller's Home -> Tax and International Operations -> Foreign Nationals

The Internal Revenue Service requires that we apply U.S. withholding and reporting rules consistent with your U.S. tax status, resident alien or nonresident alien. Resident aliens are taxed like U.S. citizens, while nonresident aliens are taxed under different withholding and reporting rules. Your U.S. tax status depends on your U.S. immigration status and U.S. presence. Also, you may be entitled to tax exemptions depending on your U.S. tax status or an applicable tax treaty, or both. Since your immigration actions and U.S. presence may change the way you are taxed, we request that you provide us with up-to-date information each year so that we may verify your status and any applicable tax exemptions. Without this information, we cannot provide you with tax exemptions which might otherwise be applicable.

New Hires

Required Forms for Nonresident Aliens New Hires

ALL Foreign National new hire paperwork must FIRST be submitted to the Division of Human Resources for review. The Division of Human Resources will then forward the information to the Tax Office for processing.

Required Documentation - Please supply the following information:

  1. Completed Foreign National Information Formor Foreign National Information System
  2. Copy of CBP I-94 Printout (Air and Sea Ports)/I94 Card(land)
  3. Copy of Picture VISA (Canada not required)
  4. Copy of Unexpired Passport Photo (If extended, please provide page along with photo)
  5. Copy of Social Security Receipt
  6. Completed W-4 Form (Please refer to W-4 Rules)
  7. Copy of Immigration Document

Penn Sponsored

F-1 StudentI-20Must be employed within dates listed
J-1 / J-2DS-2019J-1 must be employed within dates listed
J-2 / EAD Card
H, O, EI-797Must be employed within dates listed
TNCBP I-94 Printout (Air and Sea)I-94 Card (Land)
Permanent ResidencyI-485 / I-551Green or EAD Card
All Others EAD Card

Non-Penn Sponsored

F-1 StudentI-20CPT/OPT appointment on Page 3
Curriculum Practical training - work as Intern before graduation
Optional Practical Training - work after completing the degree
J-1 / J-2DS-2019J-1 Letter From Sponsor / J-2 - EAD Card
H, O, EI-797Letter from ISSS regarding transfer
All OthersEAD CardPlease refer to Visas - Types / Authorization and Employment Categories

*Please note: Students receiving Educational (Non-Service) Fellowship, I-9 and SS Receipt is not required for new hire.

Note: If you believe you are eligible for a tax treaty - Please visit the Payroll Tax Office @ 3451 Walnut Street, Room 308. Treaty Benefits WILL NOT be granted if individual does not have a valid Social Security or Individual Taxpayer Identification number.

W-4 Rules

Supplemental Form W-4 Instructions for Nonresident Aliens - http://www.irs.gov/pub/irs-pdf/n1392.pdf

i) Nonresident aliens should pay particular attention to the following lines when completing Form W-4.

Line 2. You are required to enter a social security number (SSN) on line 2 of Form W-4. If you do not have an SSN, you must apply for one on Form SS-5, Application for a Social Security Card. You can get Form SS-5 at http://www.ssa.gov/ssnumber/ss5.htm or from any Social Security Administration (SSA) office.

Note. You cannot enter an individual taxpayer identification number (ITIN) on line 2 of Form W-4.

Line 3. Check the single box regardless of your actual marital status

Line 5. Generally, you should claim one withholding allowance. However, if you are a resident of Canada, Mexico, or South Korea, a student or business apprentice from India, or a U.S. national, you may be able to claim additional withholding allowances for your spouse and children. See Publication 519 for more information.

If you are completing Form W-4 for more than one withholding agent (for example, you have more than one employer), figure the total number of allowances you are entitled to claim and claim no more than that amount on all Forms W-4 combined. Your withholding usually will be most accurate when all allowances are claimed on the Form W-4 for the highest-paying job and zero allowances are claimed on the others.

Line 6. Write “nonresident alien” or “NRA” on the dotted line. If you would like to have an additional amount withheld, enter the amount on line 6.

Line 7. Do not claim that you are exempt from withholding on line 7 of Form W-4 (even if you meet both of the conditions listed on that line).

Visas - Types / Authorization and Employment Categories

Students

  • F-1 - Academic or language training student admitted for duration of stay (D/S). May be employed on campus. No EAD required. May be employed off campus for economic reasons. EAD required. May be authorized for curricular practical training (CPT). No EAD required. I-20 must be endorsed for CPT. May be authorized for optional practical training (OPT). EAD required.
  • F-2 - Dependent of an F-1 student admitted to accompany principal visa holder. May not work.
  • F-3 - Part-time student commuting from Canada or Mexico.
  • J-1 (Student) - Student category checked on DS-2019 admitted as a student for duration of stay under the Exchange Visitor application. May be authorized by responsible officer at the institution for on-campus employment and academic training. No EAD required. Letter of authorization required.
  • J-2 (Student) - Dependent of a J-1 (Student) principal visa holder. May be authorized to work, but not to support the J-1 principal. Must have an EAD.
  • M-1 - Vocational student admitted for duration of status. May be employed for practical training. EAD required.
  • M-2 - Dependent of an M-1 principal visa holder. May not work.
  • M-3 - Part-time student commuting from Canada or Mexico.

Teachers and Trainees

  • J-1 (Non-student) - All Exchange Visitors admitted in other than the Student category on the Form DS-2019 (IAP-66). May engage in the activity authorized by the DS-2019 category. Categories include Research Scholar, Teacher, Alien Physician, etc.
  • J-2 (Non-student) - Dependent of J-1 (Non-Student) visa holders. May be authorized to work , but not to support the J-1 principal. EAD required.
  • Q-1 (Non-student) - Participant in an International Cultural Exchange Program. Authorized to work for petitioning organization. EAD not required.
  • Q-2 (Non-student) - Participant in the Irish Peace Process Cultural and Training Program.
  • Q-3 (Non-student) - Dependent of Q-2 visa holders.

Temporary Workers

  • E-3 - Individual in the United States to perform services in a specialty occupation for a sponsoring employer for a specified period of time. It currently applies only to nationals of Australia. E-3 spouses may work with an EAD. Dependents may engage in full-time study but only spouses may work.
  • H1-B - Individual in the United States to perform professional services for a sponsoring employer for a specified period of time.
  • O-1 - Individual of extraordinary ability in the sciences, arts, business, education or athletics.
  • TN - A citizen of Canada or Mexico in the United States under NAFTA to perform specific services for a sponsoring employer for a specific period of time.

Employment Authorization Document (EAD) - Eligibility Codes

CodeDescription
A01Lawful Permanent Resident of the United States
A01ALegalization applicant granted temporary residence
A02BA seasonal agricultural worker granted temporary residence
A03Admitted to the United States as a refugee
A04Paroled into the United States as a refugee
A05Application for asylum has been granted
A06A fiancé(e) of a United States citizen with K-1 nonimmigrant status; or the dependent of a fiancé(e) of a United States citizen with K-2 nonimmigrant status
A07N-8 or N-9 nonimmigrant
A08A citizen of the Federated States of Micronesia or of the Marshall Islands
A10Granted a withholding of deportation
A11Granted extended voluntary departure by the AG as a member of a nationality group pursuant to a request of the Secretary of State
A12Granted Temporary Protected Status
A13Granted voluntary departure status by the AG under the Family Unity Program
A14Granted Family Unity benefits under the Life Act Amendments
A15A V nonimmigrant
A16A T nonimmigrant (victim of a severe form of trafficking in persons)
A17Spouse of an E-1/E-2 Treaty Trader or Investor
A18Spouse of an L-1 Intracompany Transferee
C01Dependent of an A-1 or A-2 government official
C02Dependent of an employee of the Coordination Council of North American Affairs in E-1 nonimmigrant status
C04Dependent of a G-1, G-3, or G-4 nonimmigrant
C05Dependent spouse or minor child of an exchange visitor in J-2 status
C06A vocational foreign student in M-1 status with optional practical training authorization
C07Dependent of an individual classified as NATO-1 through NATO-7
C08Pending applicant for asylum in the United States
C09Pending applicant for adjustment o status to lawful permanent resident status
C10Pending applicant for suspension of deportation
C11Paroled into the United States for emergent reasons of for reasons in the public interest
C12Deportable but granted voluntary departure either prior to or after a hearing before an immigration judge
C14Granted deferred a action by INS as an act of administrative convenience to the government
C16Applicant for adjustment of status based on continuous residence in the United States since January 1, 1972
C18Final order of deportation pending
C19Applicant with prima facie eligibility for Temporary Protected Status
C21Principal S nonimmigrant or qualified dependent family member
 

C03A

C03B

C03C
A foreign student (F-1) with authorization for Optional Practical Training (OPT) directly related to the student’s area of study as follows:

Pre-completion OPT

Post-completion OPT

STEM extension of post-completion OPT
C032A foreign student (F-1) with authorization for employment under the sponsorship of an international organization within the meaning of the International Organization Immunities Act
C033A foreign student (F-1) with authorization for 20 hours a week or full-time summer employment due to severe economic necessity
C041Dependent spouse or child of an officer or employee of an international organization (G-1 or G-4)
C042Dependent student of a G nonimmigrant
C171A B-1 nonimmigrant personal or domestic servant of a nonimmigrant employer in the United States
C172A B-1 nonimmigrant domestic servant of a United States citizen who is visiting the United Stats temporarily
C173A B-1 nonimmigrant employed by a foreign airline

Payments - Taxes Withheld and Exemptions

Income Code 18 and 19 - Employment Income

Wage and Salary payments to Students, Scholars and Staff

Salaries, wages, or any other pay for personal services (referred to collectively as wages) paid to nonresident alien (NRA) employees are subject to graduated withholding in the same way as for U.S. citizens and residents if the wages are effectively connected with the conduct of a U.S. trade or business. Under IRC section 864(b). Any wages paid to a nonresident alien individual for personal services performed as an employee for an employer are generally exempt from the 30% "NRA withholding" if the wages are subject to graduated withholding. Please refer Publication 15 for IRS withholding tables.

Non-Resident Alien For Tax Purposes

FN will be paid via the Payroll System either weekly or monthly. FN will complete Form W-4. (If Non-Resident for tax purposes - please see Rules for completing W-4). Wage reported on Form W-2. If eligible for tax treaty exemption, individual will sign Form 8233 with certifying statement. FN will receive Form 1042-S and W-2 for tax filing.

Resident Alien For Tax Purposes

FN will be paid via the Payroll System either weekly or monthly. FN will complete Form W-4. (Follow the same rules as US Citizens) Wage reported on Form W-2. If eligible for tax treaty exemption, individual will sign Form W-9 with treaty article and saving clause exception. FN will receive Form 1042-S and W-2 for tax filing.

Please refer to Guide for Graduate Student Appointments for definition and coding to Teaching Assistant/Research Assistant and Teaching Fellow/Research Fellow positions. http://www.finance.upenn.edu/comptroller/tax/appointments.shtml

Income Code 16 - Self Employment Income

Self-employment income is income that arises from the performance of personal services, but which cannot be classified as wages because an employer-employee relationship does not exist between the University and the Foreign person. The Internal Revenue Code imposes the self-employment tax on the self-employment income of any U.S. citizen or resident alien who has such self-employment income. However, nonresident aliens are not subject to self-employment tax.

U.S. source nonemployee compensation for any amount in excess of zero is reportable on Form 1042-S. The University will withhold at 30% or lesser tax treaty rate if applicable (Publication 515, or Publication 901). The beneficial owner of the income (Foreign person) could claim the benefit of the tax treaty article which deals with "Independent Personal Services", or with "Business Profits". Tax & International Operations will perform an analyst to determine if individual is eligible. The FN may claim the lesser tax treaty rate by signing Form 8233 and return it to TIO Office. U of Penn will report the payment on Form 1042-S even if the entire amount of compensation is exempt under a tax treaty.

Honorarium

A gratuitous payment of money or other thing of value to a person for the person’s participation in a usual academic activity for which no fee is legally required. An honorarium is provided as a token of appreciation for participation in an activity or event, and not as a contractual obligation to pay for services rendered.

For a complete guide, please refer to Honorarium Payments at http://www.finance.upenn.edu/comptroller/tax/honorarium_matrix1.shtml

Lecturer/Consultant

An independent contractor or consultant is a person who provides services to Penn. If a specific fee is charged for a speaking engagement or an individual indicates they will participate or speak only if they are compensated, then the amount paid is considered a fee for service.

For a complete guide, please refer to Independent Contractor at http://www.finance.upenn.edu/comptroller/tax/contractor_guide.shtml

Income Code 15 - Scholarships and Fellowships

U.S. source scholarships/fellowships are reportable only for amounts which are taxable. The taxable portion of a scholarship/fellowship is that portion which is not excludible from gross income as a "qualified scholarship" under IRC section 117. U of Penn will withhold at a rate of 14% if the individual is in F, J, M, or Q nonimmigrant status. U of Penn will withhold at 30% for payees in other nonimmigrant statuses. The student articles of some income tax treaties exempt scholarships/fellowships from U.S. income tax. (See IRS Publication 515 or 901.) Tax & International Operations will perform an analyst to determine if individual is eligible. The FN may claim the lesser tax treaty rate by signing Form W-8BEN and return it to TIO Office. U of Penn will report the payment on Form 1042-S even if the entire amount is exempt under a tax treaty. Please follow IRS Publication 970 – Tax Benefits for Education on how to report.

Educational Fellowship Recipient/Pre-doctoral Trainee

Must be a Full-time graduate student enrolled in a degree program.

An Educational Fellow receives a fellowship that is normally paid from University of Pennsylvania funds, such as a dean’s account or the University Fellowship fund, which requires no service of the student for the term of the appointment. Amounts paid to such students are to aid in the pursuit of their studies, the primary purpose of which is to further the students' education and training.

A pre-doctoral trainee receives a fellowship that is paid from external grants but that requires no service of the student for the term of the appointment. The normal source of funding is a U.S. government training grant (i.e. an N.R.S.A. institutional or individual grant). A Pre-Doctoral Trainee does not perform services for the University, but may engage in research to further his or her personal and professional development.

Since an Educational Fellow and Pre-Doctoral Trainee is not required to perform services, the University is not currently required to withhold Federal income tax, FICA/Medicare tax, Pennsylvania Personal income tax, or City of Philadelphia wage tax or report any payments on IRS Form W-2. There are special rules that apply to Non-Residents of the US. See above.

Please refer to Guide for Graduate Student Appointments for definition and coding to Educational Fellowship Recipient and Pre-Doctoral Trainee positions. http://www.finance.upenn.edu/comptroller/tax/appointments.shtml

Post-Doctoral Appointments

The University’s Policy for Postdoctoral Fellows at the University of Pennsylvania is as follows - stipends provided to all recipients are considered non-compensatory and therefore not “wages” for Federal income or FICA tax withholding purposes. Stipends are taxable for Pennsylvania personal income tax and subject to withholding because such payments do not meet all of the fifteen conditions specified by the Pennsylvania Code for exclusion. These stipends are also taxable for the Pennsylvania Unemployment Contribution and City of Philadelphia wage taxes and withholding.

Although no reporting or withholding is required for U.S. postdoctoral appointments, the individual must report and pay federal income tax on any payments in excess of tuition, fees, books, and certain other expenses. There are special rules that apply to Non-Residents of the US. See above.

Please refer to Guide for Post-Doctoral Appointments for definition and coding to Post-Doc Researcher, Post-Doc Fellows and Employment Based positions. http://www.finance.upenn.edu/comptroller/tax/post_doctoral_appointments.shtml

Income Code 50 - Other Income, Prizes and Awards

Use this category to report U.S. source FDAP income that is not reportable under any of the other income categories. Examples of income that may be reportable under this category are commissions, insurance proceeds, patronage distributions, prizes, and racing purses.

As discussed earlier under Income Subject to NRA Withholding , every kind of FDAP income from U.S. sources that is not effectively connected with a U.S. trade or business is subject to NRA withholding unless the income is specifically exempt under the Code or a tax treaty. You generally must withhold at the 30% rate on this income.

Prizes/Awards Tax Treaty Chart

Tax treaties can only be applied after an individual has their U.S. taxpayer identification number (SSN or ITIN). Treaty Articles are listed next to each country for inclusion on Form W8-BEN.

Austria - 21Germany - 21Lithuania - 21Spain - 23
Belgium - 20Hungary - 19Luxembourg - 21Sweden - 22
Bulgaria - 20Iceland - 19Netherlands - 23Switzerland - 21
Czech Republic -22Ireland - 22Russia - 19Tunisia - 21
Denmark - 21Italy - 22Slovak Republic - 22Turkey - 21
Finland - 21Japan - 21Slovinia - 21Ukraine - 21
France - 21Latavia - 21So Africa - 21United Kingdom - 22

Income Code 12 - Royalties

If the royalty income is from a U.S. source and paid to a nonresident alien, then it is reportable for any amount in excess of zero. U of Penn will withhold at a rate of 30% or lesser tax treaty rate, if applicable. Foreign person or entity of the income may claim the benefit of the tax treaty article which deals with “Royalties Income” The beneficial owner may claim the lesser tax treaty rate by filing Form W-8BEN with correct Article and withholding amount to the TIO Office. U of Penn will report the payment on Forms 1042-S, even if the entire amount of income is exempt under a tax treaty.

Income Code 42/43 - Athletes & Entertainers

U.S. source personal service income paid to an individual athlete or entertainer is reportable on Form 1042-S for any amount in excess of zero. U of Penn will withhold at a rate of 30% or lesser tax treaty rate if applicable. The beneficial owner of the income will claim the benefit of the tax treaty article that deals with "artistes, athletes or entertainers" or with "Independent Personal Services", if the treaty language allows it. The beneficial owner may claim the lesser tax treaty rate by filing Form 8233 with the withholding agent. The withholding agent will report the payment on Forms 1042 and 1042-S, even if the entire amount of compensation is exempt under a tax treaty.

If the payee is a sole proprietor using a dba (doing business as) name, follow the same rules as for an individual.

If the payee is a foreign corporation, a foreign partnership, or a group of foreign individuals using a dba, here are things to consider:

  • Do the services of the athlete or entertainer constitute independent personal services or dependent personal services?
  • Does the athlete or entertainer have a fixed base or permanent establishment in the United States?
  • If a third-party agent is involved in arranging the events of the athlete or entertainer, is he a "dependent agent" or an "independent agent?"
  • If a foreign corporation bills you for the services of the athlete or entertainer,
    1. Is the foreign corporation a personal holding company?
    2. Does the foreign corporation have a fixed base or permanent establishment in the United States?
    3. Does the athlete or entertainer control his own activities, or does the corporation control his activities?
    4. Is the athlete or entertainer a major shareholder in the foreign corporation?
    5. Is the athlete or entertainer trying to use the corporate structure for tax advantages, which would not accrue to an individual?
    6. Has the foreign corporation been formed under the laws of a tax haven country, or been formed in a certain country because of the favorable tax treaty treatment afforded by the U.S. treaty with that country?
    7. Is the athlete or entertainer allocating his income between the foreign corporation and himself for tax advantages?
  • If a group of entertainers is involved, and the group asks for payment to be made to the group, which of the following best describes this group of entertainers:
    1. a group of alien individuals,
    2. a foreign partnership,
    3. a domestic partnership with foreign partners, or
    4. employees and/or agents and/or shareholders of a foreign corporation?

Central Withholding Agreements

Foreign athletes and entertainers who are making a tour of the United States may wish to enter into a "Central Withholding Agreement" with the IRS because, generally, such agreements reduce the amount of taxes withheld on the U.S.-source gross receipts of the foreign athlete or entertainer. A request for a central withholding agreement should be submitted at least 45 days before the agreement is to take effect. For additional information on obtaining a CWA, contact us at CWA.Program@irs.gov or forward your request to the address shown in the discussion found at Central Withholding Agreements

Tax Treaty Claims by Groups of Foreign Entertainers:

Any foreign person (including a nonresident alien individual, a foreign corporation, a foreign partnership, or any other entity which is not a U.S. person) which makes a tax treaty claim with a U.S. withholding agent must provide his TIN (Taxpayer Identification Number) on Form 8233 or on Form W-8BEN (with certain exceptions involving income from interest and dividends). The regulation also makes clear that the “beneficial owner” of the income must make the tax treaty claim. The beneficial owner of the income is the person that is required under U.S. tax principles to include the amount paid in his gross income under Internal Revenue Code section 61, and to report the income on a U.S. income tax return. A beneficial owner can be an individual, a corporation, a complex trust, an estate, or any other entity that is not a flow-through entity.

Reporting Requirements and Forms

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