Old Dominion University, in fulfilling its mission, conducts a variety of public events and functions. In addition, Colleges and Departments of the University also invite guest speakers/lecturers and performers to campus for academic symposia, class lectures or in support of specific educational, research or public service missions of the unit. In the event that those individuals who are invited are international visitors, very specific additional paperwork is required to ensure compliance with various federal and state taxing authorities and immigration guidelines.
The Office of International Student and Scholar Services (Ext. 3-4756) should be consulted in addition to the Assistant Controller for Disbursements (Ext. 3-4262) to ensure the additional proper paperwork is completed.
This procedure outlines the additional paperwork required to pay honoraria to international visitors traveling to the United States with a valid B-1 or B-2 visa or who are from a Visa Waiver Country.
International visitors either on a B-1 (visitors for business) visa or on a B-2 (visitors for pleasure/ tourism) visa and individuals from visa waiver countries are allowed to accept honoraria under the 1998 "American Competitiveness and Workforce Improvement Act (ACWIA) under the following circumstances:
B-1 and B-2 nonimmigrants are allowed to enter the United States in order to engage in a "usual academic activity" for a period not lasting longer than nine (9) days at any single institution and may be paid an honoraria as well as associated incidental expenses. The B-1/B-2 individual may not accept honoraria from more than five (5) institutions or organizations within the previous six month period.
Additional Paperwork Required
Along with standard forms - LPO, Certified Work Statement, Independent Contractor Questionnaire or Industry Practice form, and if required, the Standard Engagement Agreement:
- Completed W-7 "Application for IRS Individual Taxpayer Identification Number" if the individual does not have a U.S. Social Security Number or a U.S. Individual Taxpayer Identification Number already. The reason code that should be checked should be "h" other - with "exception 1: honoraria - form 1042s requires the use of an ITIN" written on the space provided after box "h".
The form must be reviewed and approved by Old Dominion University's responsible officer in the Office of International Student and Scholar Services and sent to IRS as soon as possible to ensure receipt of ITIN by the 1042s reporting deadline.
- Completed W-8BEN "Certificate of Foreign Status of Beneficial Owner for United States Tax Witholding"
to establish that the international visitor is a foreign person and subject to Non-Resident Alien Tax Withholding and Reporting requirements. No Tax Treaty Benefits will be given to international visitors being paid honoraria.
- International Visitor - Statement of Honoraria Eligibility form to ensure that the individual is in compliance with the requirements of the 1998 American Competitiveness and Workforce Improvement Act (ACWIA).
- Copies of the individual's passport, I-94 or I-94W showing appropriate visa type of B-1, B-2 or WB/WT in the case of a Visa Waiver entrant.
Payment Processing and Tax Withholding Requirements
Federal Tax Withholding
Honorarium payments to foreign persons are subject to 30% non-resident alien (NRA) federal tax withholding. The gross amount of the payment must be recorded as an expenditure to the budget, the net check amount is issued to the international visitor for the honorarium payment and the 30% amount withheld is deposited as a type 1042S tax deposit with the IRS via electronic funds transfer.
This tax deposit will be completed by Lisa Hecker, Payroll Audit Supervisor from the "Scholarship Tax Withholding" account number 015030-1032. This account should be renamed to something like "NRA Tax Withholding".
State Tax Withholding
There may also be state tax withholding requirements that must be researched and documented.
International visitors are required to have a U.S. taxpayer identification number - either a social security number or an individual taxpayer identification number - if they receive any U.S. source income. Honoraria payments are considered payments for Independent Personal Services. If the services are performed in the United States then the payments are considered U.S. Source income. All payments of U.S. Source income subject to flat rate withholding to foreign persons (nonresident aliens) are reportable on Form 1042s.
If the international visitor does not have the ITIN at the time of payment, Form W-7 must be completed, certified and sent to the IRS. Accounts Payable staff should generate a temporary ODU identification number for the individual which will be changed to the IRS ITIN once the ITIN is received by the International Student and Scholar Services Offices at ODU. In addition, no reduction in the amount of tax withholding due to a Tax Treaty can be allowed without an ITIN.
Honorariums paid to international visitors must be reported on Form 1042s (never Form 1099). The due date of these forms is March 15th of the year following the reporting year. Therefore, payments made during calendar year 2004 are reported on Form 1042s which is due on March 15, 2005. In addition, the annual report or Form 1042 is also due on March 15, 2005.
There is only one Form 1042 filed with the Internal Revenue Service for each employer identification number. For Old Dominion University, our Form 1042 and Forms 1042s are completed by Lisa Hecker, Payroll Audit Supervisor. She will maintain an Accounts Payable Honoraria spreadsheet to monitor these payments for reporting purposes.
Honorarium amounts are reported using income code 16 on Form 1042s. It is important to note that unlike Form 1099 reporting, there is NO De Minimis reporting amount threshold for Form 1042s reporting. This means that all amounts paid are reportable on Form 1042s not just amounts over $600 as is the case for Form 1099 reporting.
Banner Processing Issues
Until proper testing can be completed to process payments through Accounts Payable with associated 30% nonresident alien (NRA) tax withholding the following procedure will be followed:
- Issue a net check to the international visitor from 015001-0280.
- Process the net payment* (charged to appropriate budget code and sub account) through the Accounts Payable system, using the purchase order and adding an MA2 address sequence so that the check is payable to the international visitor or Old Dominion University. This will reduce the encumbrance to the tax amount. This check will be deposited to 015001-0280, which will clear the payroll advance.
- Process the tax amount* (charged to the appropriate budget code and sub account) through the Accounts Payable system, using the purchase order and adding an MA3 address sequence, so that the check is payable to the international visitor or Old Dominion University. This will close the encumbrance. This check will be deposited to 015030-1032 for payment to the IRS via EFT for the NRA Federal Tax Liability.
The net check amount and the tax amount should equal the total gross amount as documented on the purchase order. Both should be charged to the same budget code and sub account as specified on the purchase order. This will ensure that the appropriate gross expenditure gets charged properly.
Travel Expense Reimbursements to International Visitors
The IRC §274 Accountable Plan Rules apply to nonresident alien reimbursements for travel and living expenses. That means that as long as the expenditures are properly substantiated, according to Commonwealth policy and IRS regulations, then the reimbursements are not taxable or reportable.