709 - Policy on Federal and State Tax Withholding Requirements for Payments to Non-Resident Aliens Performing Services in the United States

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
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Details

Article ID: 132667
Created
Tue 4/20/21 11:18 AM
Modified
Thu 5/5/22 3:54 PM
Responsible Unit
School, Department, or other organizational unit issuing this document.
Finance and Budget
Issuing Officer
Name of the document Issuing Officer. This is the individual whose organizational authority covers the policy scope and who is primarily responsible for the policy.
Issuing Officer Title
Title of the person who is primarily responsible for issuing this policy.
Director, Accounts Payable and Vendor Services
Next Review
Date on which the next document review is due.
09/15/2023 12:00 AM
Last Review
Date on which the most recent document review was completed.
09/17/2021 12:00 AM
Last Revised
Date on which the most recent changes to this document were approved.
09/17/2021 12:00 AM
Effective Date
If the date on which this document became/becomes enforceable differs from the Origination or Last Revision, this attribute reflects the date on which it is/was enforcable.
09/17/2021 12:00 AM
Origination
Date on which the original version of this document was first made official.
06/01/1999 12:00 AM