The sponsoring department is responsible to make sure the individual receiving payment is legally eligible to receive the requested payment. See the Payment Authorization Matrix prior to inviting or engaging in a contract with a foreign individual to determine if the University can legally pay the individual.
It is the University’s policy not to make any payment to foreign individuals that are not allowed by law. Illegal payments to foreign individuals may result in fines to the University up to $10,000 per occurrence and/or possible criminal prosecution of University employees and detention or deportation of the foreign individual. As noted in the Accounts Payable Policy, the University will not reimburse any employee for payments to foreign individuals through personal funds.
Once it is determined that a foreign national can legally be paid, the payment may or may not be taxable. Under the Internal Revenue Code, payments to nonresident aliens for tax purposes are taxed differently than payments made to a U.S. citizen or resident alien. The regulations also place greater responsibility on the University, as a tax-withholding agent, to withhold and report taxes from nonresident alien payments.
Depending on the type of payment and the visa type of the individual, payments to nonresident aliens may be tax-free or taxed at a rate as high as 30 percent. See the Payment Authorization Matrix for general information about taxable rates or see the individual payment sections Accounts Payable, Payroll and Scholarships for more detailed discussions.
This policy covers the most common tax issues relating to the University’s responsibilities in withholding and reporting nonresident alien tax; however, it does not cover every possible tax situation. If a payment is to be made that is not covered by the policy, contact the Finance Office prior to making the payment. The University is responsible for maintaining compliance with both the letter and the intent of all federal, state and local laws.