Nonresident Alien Payment Policy

Applies To:

Month/Year Posted: 
July, 2013


This document contains Humboldt State University's policies and procedures governing payments to nonresident aliens. Questions regarding these policies and procedures may be directed to the Accounts Payable Coordinator.

I. Definition

A nonresident alien is a person who is not a U.S. citizen or resident, and does not meet either of the following two qualifications for resident alien status:

  1. Has Alien Registration Card ("green card"); or
  2. Meets substantial presence test.

II. Taxpayer Identification Numbers

All nonresident aliens must have an Individual Taxpayer Identification Number (ITIN). No payments will be made without a correct ITIN. The IRS will issue an ITIN to an alien who does not have and is not eligible to get a Social Security Number (SSN). An ITIN is for tax purposes only. It does not entitle an alien to receive Social Security benefits or to change his or her employment or immigration status under U.S. law. To apply for an ITIN, IRS Form W-7 must be filed with the Internal Revenue Service. It takes approximately 30 days to receive an ITIN once requested.

III. Tax Withholding

The University is required by law to withhold taxes from payments to nonresident aliens for independent personal services. Independent personal services (a term commonly used in tax treaties) are personal services performed by an independent nonresident alien contractor as contrasted with those performed by an employee. This category of pay includes payments for professional services made directly to the person performing the services. The applicable withholding rates are as follows:

  1. Federal taxes at 30%; and
  2. State taxes at 7% for payments totaling $1,500 or more.

IV. Exemptions

A nonresident alien may be entitled to an exemption from or a reduced rate of federal withholding under one of the following:

  1. tax treaty between their country of residence and the United States; or
  2. A valid withholding agreement between the Internal Revenue Service's Assistant Commissioner (International) and the nonresident alien individual; or
  3. A letter from the Internal Revenue Service's Assistant Commissioner (International) authorizing a final payment exemption.

The Assistant Commissioner (International) may be contacted at Internal Revenue Service, Assistant Commissioner (International), 950 L'Enfant Plaza South SW, Washington DC 20024.

In order to qualify for an exemption from State of California withholding (on payments totaling $1,500 or more), a nonresident alien must have one of the following:

  1. A California exemption certificate; or
  2. A valid (legitimate) California street address.

Information regarding California exemption certificates can be obtained by contacting the Franchise Tax Board, PO Box 942840, Sacramento CA 94240-0040.

V. Tax Treaties

Under most tax treaties, pay for independent personal services performed in the United States is exempt from U.S. income tax only if the independent nonresident alien contractor meets all three of the following conditions:

  1. Performs the services during a period of temporary presence in the United States (usually not more than 183 days); and
  2. Is a resident of the treaty country; and
  3. Provides IRS Form 8233 - Exemption from Withholding.

See IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations, for information on tax treaties in effect between foreign countries and the United States.

VI. Reimbursement for Travel Expenses

Reimbursement for ordinary and necessary travel expenses (transportation, lodging, and meals) is not subject to federal and state withholding if both of the following conditions are met:

  1. An ITIN is provided; and
  2. Original receipts for all expenses are submitted.

VII. Reporting

Compensation totaling $600 or more paid to a nonresident alien for independent personal services is reported annually to the nonresident alien, the Franchise Tax Board, and the Internal Revenue Service. IRS Form 1042-S and FTB Form 592B are issued to nonresident aliens prior to February 1 each year. The forms reflect payments and tax withholding, if applicable, for the preceding calendar year.

VIII. Payment Procedures