Foreign National Tax Terminology

Income received for services performed outside of the U.S., or a scholarship/fellowship/grant paid by a non-U.S. payer (usually a foreign government or corporation).

See IRS Publication 519 for sourcing rules.

Resident Aliens: foreign source income is generally taxable income.

Nonresident Aliens: foreign source income is generally not taxable income.

Scholarship income that is not applied toward tuition, books, and required fees.

Resident Aliens: The IRS does not require universities to withhold taxes on, or report non-qualified scholarship payments issued to Resident Aliens for tax purposes. It is important for Resident Aliens to be aware that non-qualified scholarship payments are generally considered to be taxable income reportable on individual tax return. It is the individual taxpayer’s responsibility to be aware of their tax liability, schedule estimated payments, and file a tax return with the IRS accordingly. 

Nonresident Aliens: F or J students receiving non-qualified scholarships are generally subject to 14% federal income tax withholding in the absence of income tax treaty benefits.

See IRS Topic No. 421 Scholarship, Fellowship Grants, and Other Grants.

A foreign national who does not meet the test for a Resident Alien, which is a green card test or substantial presence test (SPT)*. Most persons on an F-1 or J-1 visa who arrive to the U.S. for the first time will be classified as Nonresident Aliens for tax purposes.

*The substantial presence test is met if an individual is present in the U.S. more than 183 days during a three-year period that includes the current calendar year and the preceding two years. "Presence in the U.S." excludes days during which an individual is classified as an "exempt individual" - "J" and "F" visa holders are "exempt individuals" for a period of time when they arrive.

See IRS Publication 519 U.S. Tax Guide for Aliens and IRS Substantial Presence Test.

Income that is credited toward tuition, books and/or required fees. 

Resident Aliens or Nonresident Aliens: qualified scholarships are generally not taxable to the recipient who is a candidate for a degree, regardless of tax residency status.

However, compensation for services rendered that is used to cover tuition and required fees, or used to purchase textbooks, is considered taxable earnings.

A foreign national who meets one of two tests:

1. Green card test; or, 
    
2. Substantial presence test. The substantial presence test is met if an individual is present in the U.S. more than 183 days during a three-year period that includes the current calendar year and the preceding two years. "Presence in the U.S." excludes days during which an individual is classified as an "exempt individual" - "J" and "F" visa holders are "exempt individuals" for a period of time when they arrive.

See IRS Publication 519 - U.S. Tax Guide for Aliens and IRS Substantial Presence Test.

The United States has income tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.

See IRS Publication 901 for the list of US Tax Treaties.

Scholarship, fellowship, salary, wages or other compensation paid by a U.S. payer to an individual studying or engaging in research activities in the U.S.

The ITIN is a tax processing number issued by the Internal Revenue Service. A foreign individual may apply for an ITIN when not eligible to receive a social security number for purposes of claiming a tax treaty exemption or filing a U.S. tax return.

A Nonresident Alien individual who is not eligible for a social security number but is required to file a U.S. tax return, including claiming a refund of tax under the provisions of a U.S. Income Tax Treaty, needs an ITIN.

IRS Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding is issued by the University to Nonresident Aliens that summarizes certain payments made to or on behalf of Nonresident Aliens during a calendar year and any taxes withheld. Amounts reported include salary or wages exempt under a tax treaty, fellowship payments, nonqualified scholarships, and prizes subject to tax withholding.

The University will generate the form to eligible students and scholars upon request. Note that, to receive the form, these students and scholars must fill out information in the Foreign National Information System (FNIS).

IRS Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien must be filled out by any nonresident wishing to claim tax treaty benefits (if eligible). The individuals must have a valid ITIN.

IRS Form W-2, Wage and Tax Statement is issued by the University. It summarizes salary and wages paid and taxes withheld for the calendar year, except for wages exempt under a tax treaty (see Form 1042-S).

IRS Form W-4, Employee's Withholding Allowance Certificate is a federal form completed by employees to specify their income tax withholding election.

NOTE: There are specific guidelines for Nonresident Aliens completing this form. See Supplemental Form W-4 Instructions for Nonresident Aliens (Notice 1392) for more information.

IRS Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding is completed by eligible students and scholars receiving taxable scholarships, only, in order to claim tax treaty benefits.

This form may also be completed by foreign vendors to verify foreign status. 

The University will generate the form to eligible students and scholars claiming tax treaty benefits. Note that, to receive the form, these students and scholars must fill out information in the Foreign National Information System (FNIS).

IRS Form W-9, Request for Taxpayer Identification Number and Certification is used for any Resident Alien claiming tax treaty benefits.