Payments to Foreign Visitors
This guide is intended to outline processes and procedures for making payments and reimbursements to foreign visitors as part of a University business. This guide will outline the circumstances for allowable payments and describe the associated tax implications. Depending on a foreign visitor’s immigration and work authorization status, he or she may be prohibited from receiving payments and reimbursements of expenses or from having payments made on his/her behalf by the University.
Foreign Visitor (Nonresident Alien): A nonemployee that is neither a US citizen nor a resident alien for tax purposes. See IRS explanation for Resident Alien.
US Sourced vs. Foreign Sourced Income: Income is pay for personal services performed such as honoraria and fee for service as well as royalties, rents and software license fees. The source of the income is the place where the vendor performs the service or earns the income for which they are being compensated. US sourced income is income for services performed in the United States, US royalties, rental of personal property located in the US and licensing fees for software used in the US. Foreign sourced income is income for services performed outside the United States, non US royalties, rental of personal property located outside the US and licensing fee for software used outside the US. Only US Sourced income is reported and subject to tax by the IRS depending on the availability of a tax treaty. Foreign Sourced income is neither reportable nor subject to tax by the IRS.
Honoraria: A compensation payment made without legal obligation on the payer’s part to a person for services conducted in a volunteer capacity, or for services for which fees are not traditionally required. An honorarium is provided as a token of appreciation for participation in a usual academic activity that benefits the University, including lecturing, teaching, consulting, conducting research, attending meetings, symposia or seminars, or otherwise sharing knowledge.
Fee for Service: A compensation payment for providing a service, such as a speaking engagement, consulting or any type of service where the independent contractor will participate only if they are compensated.
Reimbursement: A non-compensation payment made for expenses incurred and paid by a person or entity other than the University incurred as part of University business. For example, airfare, lodging and meals. Expenses must be supported by valid receipts. Please see the Approval, Authority and Documentation of Expenditures section of the Business Expense Policy for details of a valid receipt.
Social Security Number (SSN): A nine-digit number issued by the Social Security Administration to track benefits and used by the Internal Revenue Service (IRS) to record earnings information.
Individual Taxpayer Identification Number (ITIN): A nine-digit number issued by the IRS used by the IRS to record earnings information.
- Honoraria, Fee for Services and Reimbursements for Foreign Visitors Guidelines
- Honoraria or Fee for Services (Income)
Payments of honoraria, fee for service, other earned income and reimbursements can be made based on the visa status of the individual and are subject to the visa constraints and the IRS tax liabilities. Please be aware that just by completing the following forms does not lead to an automatic exemption from withholding or eligibility for payment.
Whenever possible, departments should make travel and lodging arrangements directly with third-party vendors (i.e. airlines or hotels) for their foreign visitors using the Department Card.
An expense reimbursement made directly to a foreign visitor will not be considered as income and will not require tax withholding or reporting, provided that the following exist:
- The foreigner’s visit benefits the University.
- All expenses are supported with receipts.
Documentation and Processing
Documentation required to create the vendor can be found on the Foreign Vendor Document Requirements. All documentation must be submitted to the Vendor Maintenance Coordinator (smartin [at] umass.edu) along with an invoice and valid receipts. Once the foreign visitor is created in the University's finance system the department may create a purchase order and submit an invoice for payment.
Where the honorarium, fee for service or other income is earned, whether here in the US (US Sourced Income) or in a foreign country (Foreign Sourced Income), is important to determine how to report the payment.
A. US Source Income
Honoraria or fees for services earned in the US are subject to complex visa constraints and IRS liabilities. US sourced income is subject to 30% IRS withholding unless a treaty is applicable between the foreign visitor's country of residence and United States for a reduced tax withholding rate and/or exemption. To claim treaty benefits, the visitor must have a SSN or an ITIN. Departments that want to compensate a foreign visitor for work done here in the US must first contact the Vendor Maintenance Coordinator (smartin [at] umass.edu) to begin the payment process.
The University has enlisted Glacier International to assist us with this complex task of making these payments. Glacier is an online Tax Compliance System designed to help collect information, make income and tax residency determinations, manage paperwork, keep data and file reporting statements with the IRS. Glacier is completely a Web-based system that includes the latest in high tech methods for security, data transfer, and user interface. Tax residency determination is complicated. The Glacier Tax Compliance Software takes the visitor's personal information and selects the best tax treaty option (if available) for the individual or entity.
To begin the process, your department must email the following information to the Vendor Maintenance Coordinator (smartin [at] umass.edu):
- The name of the foreign visitor
- The foreign visitor's email address
The Controller’s Office sends the foreign visitor his or her unique login ID, a password and instructions. The foreign visitor can then begin entering their personal information into the Glacier input screens.
Please note the Controller’s Office cannot make the foreign visitor available for payment in the University’s Finance system until the Glacier online Tax Compliance system is completed by the foreign visitor. The Vendor Maintenance Coordinator will create the foreign visitor’s vendor record in the University Finance System within two days of the visitor’s completion of the Glacier online system. If you are not finding your foreign visitor available for payment in the University’s Finance system please make contact with your foreign visitor to verify that the online process was completed. Certain payments require the foreign visitor to have a Social Security Number (SSN) or an Individual Tax Identification Number (ITIN) to avoid IRS withholdings even if a treaty exists. If your foreign visitor would like to apply for an ITIN they can do so in person by contacting the Vendor Maintenance Coordinator (smartin [at] umass.edu). The application for an ITIN requires a face-to-face meeting in the Controller’s Office.
If you or your foreign visitor needs information on obtaining a proper visa, please contact the International Programs Office at 545-2710.
Documentation and Processing
Documentation required to create the vendor can be found on the Foreign Vendor Document Requirements. Certain required forms are generated by the Glacier system and submitted to the Vendor Maintenance Coordinator (smartin [at] umass.edu). It is the responsibility of the foreign visitor to submit all required documents. Once the foreign visitor is created in the University’s finance system the department may create a purchase order and submit an invoice for payment.
B. Foreign Sourced Income
Honoraria, fee for services or other income physically earned in a foreign country is not reportable to US Immigration or the IRS.
Documentation and Processing
Documentation required to create the vendor can be found on the Foreign Vendor Document Requirements. All foreign payment documentation must be submitted to the Vendor Maintenance Coordinator (smartin [at] umass.edu) with the invoice. Once the foreign visitor is created in the University’s finance system the department may create a purchase order and submit an invoice for payment.