Financial Services Manual (FIN)

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Effective: 5/1/1996

Revised: 9/12/2011

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FIN 425–05: Student Financial Support Payments to Nonresident Aliens

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Purpose

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To describe the policy for making scholarship, fellowship, grant, and stipend (no services required) payments to nonresident alien students

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Sources

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U.S. Citizenship and Immigration (USCIS)
University policy

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Applicability

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All payments for scholarships, fellowships, grants, and stipends, for which no services are required, made to students identified as nonresident aliens on the university registrar’s database

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Background

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The Internal Revenue Service (IRS) requires that all fellowship, scholarship, grant, and stipend payments be made in accordance with IRS regulations. These regulations require that taxes be withheld from payments made to nonresident alien students enrolled in a degree-granting university to the extent such payments exceed the cost of tuition, fees, books, and other eligible allowances related to the student’s studies, unless the nonresident alien:

  1. is exempt due to a tax treaty between the nonresident alien’s country and the U.S.

    and

  2. has submitted to the appropriate university office a completed IRS Form W-8BEN properly executed and signed by the nonresident alien.

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 students are required to declare their country of citizenship and U.S. immigration status upon admission to ASU. This information is subsequently entered into the university registrar’s database. The information is used to determine whether IRS Form W-8BEN is required based on review by the Payables and Reimbursements Department and the Student Business Services Office at the time disbursements are made to or on behalf of the student. Form W-8BEN is available from Payables and Reimbursements (480/965–3511) or Financial Services (480/965–3601).

Taxes will be withheld from student support payments to nonresident aliens if the U.S. does not have a tax treaty with the nonresident alien’s country of residence that exempts scholarship, fellowship, grant, and stipend payments (not for services rendered) from the withholding of tax, or if IRS Form W-8BEN has not been correctly completed before payment is processed. If subject to withholding, the amount paid to the student will be reduced by taxes totaling 14 percent of the net taxable balance (the total payment less the amount excludable for expenses related to the student’s studies). The withheld amount will be remitted to the IRS. 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, the International Students Office, and the Office of International Programs.

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 scholarships, fellowships, grants, or stipends (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 immigration status 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 the tax compliance area in 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
Nonresident alien students
  1. Correctly report immigration status on admissions forms. Properly complete IRS Form W-8BEN when requested to do so by the Student Business Services Office.
As continual contact is made with nonresident alien students:
International Students Office
  1. Update the university registrar’s database to keep the immigration status field in the database current. This office should also act as a liaison between the student and Financial Services to assist the nonresident alien student.
Office of International Programs
  1. Inform the visiting student scholar of the need to properly report his or her immigration status with the university registrar. This office should also act as a liaison between the nonresident alien scholar/student and Financial Services to assist the nonresident alien.
Student Business Services Office
  1. Identify nonresident alien students receiving financial aid, based on system generated reports. For each student, calculate the aid subject to taxation by subtracting tuition, fees, and other eligible costs. Withhold 14 percent of the net taxable balance unless the student lives in a tax treaty country and completes IRS Form W-8BEN.
Payables and Reimbursements
  1. For all student financial support paid with a Payment Voucher (PV), review through the university registrar’s database the student’s country of citizenship. If the student is not a U.S. citizen, forward the payment documentation to Student Business Services to obtain computation of necessary exclusions and completion of the IRS Form W-8BEN, if applicable.

endtable

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Cross-Reference

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For the general policy on student financial support, see FIN 422–01, “Student Financial Support.”

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