Financial Services Manual (FIN)

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Effective: 5/1/1996

Revised: 9/12/2011

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FIN 425–06: Payments to Postdoctoral Nonresident Aliens

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Purpose

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To describe the policy for making scholarship, fellowship, grant, and stipend payments, for which services are not required, to nonresident alien postdoctoral students, researchers, and sponsored project participants

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Sources

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Internal Revenue Service
University policy

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Applicability

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All payments for scholarships, fellowships, grants, and stipends, for which services are not required, made to postdoctoral students, researchers, and participants in sponsored projects

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Background

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The Internal Revenue Service (IRS) requires that all fellowship, scholarship, grant, and stipend payments, for which services are not required, be made in accordance with IRS regulations. These regulations require that taxes be withheld from payments made to nonresident alien postdoctoral students, researchers, and sponsored project participants unless exempt due to a tax treaty.

The IRS also requires that all payments made to nonresident aliens be reported annually on IRS Form 1042S, Foreign Person’s U.S. Source Income Subject to Withholding. A copy of the form is sent to the nonresident alien at the time it is filed with the IRS. The IRS requires that Form 1042S be filed by March 15 following the calendar year in which payments were made to the nonresident alien.

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Policy

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All postdoctoral students, researchers, and sponsored project participants are required to declare their citizenship and U.S. immigration status if applicable, and to indicate whether they are in postdoctoral status, upon arriving at ASU. Payments to postdoctoral nonresident aliens will be subject to withholding unless:

  1. the payment is exempt due to a tax treaty between the nonresident alien’s country and the U.S.
  2. the nonresident alien has submitted to the appropriate university office a completed IRS Form W-8BEN or Form 8233 properly executed and signed by the nonresident alien

    and

  3. the nonresident alien has completed the Alien Data Collection Form and attached a Student and Exchange Visitor Information System (SEVIS) Form I-20 or DS-2019, an I-94, and a copy of his or her passport photo. (For more information on completing the Alien Data Collection form see FIN 425–04, “Nonresident Alien Independent Contractors and Other Foreign Entities.”)

If these requirements are not met, the payment will be reduced by 30 percent for federal withholding. A list of existing tax treaties between the U.S. and other countries is found in IRS publication 901, U.S. Tax Treaties, which is available from Financial Services (480/965–3601), the International Students Office (480/965–7451), and the International Programs Office (480/965–5965).

If an individual believes he or she is entitled to tax treaty benefits, he or she should contact the ASU tax compliance area (480/965–8479 or 480/965–0108) for an appointment to discuss the applicable tax treaty and complete the required forms to exempt the withholding requirement.

Payments cannot be made to a nonresident alien unless he or she is in the U.S. on a visa type that allows him or her to receive scholarship, fellowship, grant, or stipend payments (not for independent services). See FIN 425–02, “Immigration Status—Eligibility to Receive Payment,” for guidance on allowable payments to various immigration categories. Any additional questions regarding visas should be referred to the International Programs Office at 480/965–5965 or the International Students Office at 480/965–7451. For more information concerning payments made to nonresident aliens, contact at Financial Services at 480/965–8479 or 480/965–0108.

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Additional Information

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For additional guidelines on nonresident alien tax issues see the ASU Foreign Visitor Tax Guide issued by Financial Services. A copy of this guide may be obtained by calling Financial Services at 480/965–8479 or 480/965–0108.

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ProcedureD

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Responsibility
Action
Various university departments
  1. Identify nonresident alien participants. Coordinate with the International Programs Office the preparation of the appropriate documentation to bring the nonresident alien through the U.S. border.
International Programs Office
  1. Maintain database of all foreign exchange postdoctoral visitors and participants. Share this information with Financial Services to ensure proper treatment of disbursements to nonresident alien postdoctoral participants/scholars.
Nonresident alien postdoctoral participant
  1. Properly complete the Alien Data Collection Form and IRS Form W-8BEN when requested to do so by the university.
Payables and Reimbursements
  1. Forward payment documentation for postdoctoral scholarships, fellowships, grants, and stipends to the Student Business Services Office or to the tax compliance area to obtain computation of necessary exclusions and Form W-8BEN from the postdoctoral participants.
endtable

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