Title
The University of North Carolina at Chapel Hill Finance Policy 709 - Policy on Federal and State Tax Withholding Requirements for Payments to Non-Resident Aliens Performing Services in the United States
Introduction
Purpose
The purpose of this policy is to provide information and instruction regarding tax compliance for payments to foreign national independent contractors performing services in the United States.
Policy
Policy Statement
Non-resident aliens may perform independent personal services for the University as independent contractors, but are subject to special federal income tax withholding requirements. Non-resident alien independent contractors performing services in the United States are subject to a 30 percent (%) federal income tax withholding rate unless a tax exemption is claimed based on a U.S. tax treaty with the non-resident alien's country of residence. Guidance on forms and information necessary to claim treaty exemption is found in Finance Procedure 709.1 - Completing Tax Withholding Forms as a Non-Resident Alien Performing Services in the United States. Payments made under independent contractor agreements are reported to the non-resident alien and to the Internal Revenue Service on Form 1042-S.
Non-resident aliens performing services for the University as independent contractors may also be subject to the withholding requirements of NC income tax withholding described in Finance Policy 707 - NC Income Tax Withholding Requirement for Non-Wage Compensation Paid to Non-Residents.
Exceptions
None.
Additional Information
Frequently Asked Questions
Q: My department wants to bring a historian from France to UNC to speak at a special event. The historian will be paid honoraria and will be traveling on a B-1 (tourist) visa. Is this plan for payment of the speaker OK?
A: Honoraria for academics can be paid on a B-1 or a B-2 visa. Travel expenses can also be reimbursed for a speaker traveling on a B-1 or a B-2 visa. Follow the procedures for paying a non-resident alien performing services in the United States to determine how much withholding is necessary for honoraria.
Q: How much more processing time is needed for contractor review and approval to create a vendor and/or independent contractor?
A: Extra time is required at both the department and the central office level. This process also will determine if the independent contractor can be paid by UNC. Reminder: All independent contractors must be approved prior to performing the service for which they will be paid, or the visit for which they will be receiving honoraria. Please allow an additional two weeks for IC approval (assuming documentation is complete) and an additional week for payment processing when establishing a Non-Resident Independent Contractor. Salaried Non-Resident Aliens who are paid through payroll are not subject to this paperwork.
Q: A professor in my school wants to know why this process is necessary.
A: The review and approval process is required to comply with U.S. Immigration and tax laws.
Q: I was informed that the non-resident alien who is about to perform IT consulting services in the U.S. for my department was here on a tourist visa. I need to get this person paid; how do I proceed?
A: A B-1 (tourist) visa does not allow for compensation for consulting services. UNC cannot pay the consultant on this type of visa. Similar restrictions apply to other visa types, making it extremely important to submit the independent contractor agreement for review before the independent contractor performs any kind of labor for the University.
Related Requirements
External Regulations and Consequences
University Policies, Standards, and Procedures
Contact Information
Policy Contacts
| Subject |
Contact |
Numbers |
Email |
| Independent Contractor Predetermination Process |
Accounts Payable and Vendor Services |
T. 919-843-5098
F. 919-962-2356 |
accountspayable@unc.edu |
| NC Non-Resident Withholding |
Accounts Payable and Vendor Services |
T. 919-843-5098
F. 919-962-2356 |
accountspayable@unc.edu |