Nonresident Aliens (NRA)

Homeland Security and the Internal Revenue Service (IRS) defines an Nonresident Aliens (NRA) as any individual who is not a U.S. citizen or U.S. national.


 

Who is a Nonresident Alien (NRA)

A Nonresident Alien (NRA)  is an Alien who has not passed the Permanent Resident card test (green card test)  or the substantial presence test.

The Substantial Presence Test Form is a criterion used by the Internal Revenue Service (IRS) in the United States to determine whether an individual who is not a citizen or lawful permanent resident in the recent past qualifies as a “resident for tax purposes” or a “nonresident for tax purposes”;[1][2] it is a form of physical presence test. The SPT should be used in conjunction with the Green Card Test (the criterion that the individual possessed a valid Green Card at any time of the year).  An individual who satisfies either one or both of these tests is treated as a resident for tax purposes.

If a Nonresident Alien (NRA) is not sure whether they are a U.S. Person or a Nonresident Alien please have the NRA complete and sign the attached Substantial Presence Test Form and submit it to the paying department along with their required immigration and payment documentation.

Process and Documentation required
to pay a Nonresident Alien

For services performed outside the United State and its territories

If services are performed by Nonresident Alien (NRA) outside the United States, the services are considered Non-U.S. Source Income and you must follow the instructions and policy at Non-U.S. Source Income (Foreign Source Income).

For services performed in the United States and its territories

If services are performed by a Nonresident Alien (NRA) within the United States and its territories the payments are considered U.S. Source Income and there are strict/no exception requirements that must be met in order to make a payment.

When paying either (1) an agent, or (2) foreign company who sends a representative to perform the service in the United States, the UW is required to obtain:

  1. Immigration documents for the individual performing the services in the United States
  2. Applicable tax treaty forms for the individual performing the services in the United States
  3. Payments may be made to the agent or foreign company

Follow the steps below for each Nonresident Alien (NRA) guest performing services in the United States and its territories:

References

Process Flowchart:    Process and Document Flowchart for Non-Scholarship/Fellowship Payments. Includes U.S. Individual Taxpayer Identification Number (ITIN) application process is a process flow chart of the above steps for payment to a Nonresident Alien (NRA) guest performing services in the United States and its territories.  This has been done for users that prefer a flowchart versus a write-up.

Tax Treaties: For Non-Employee payments made through Accounting Services:  Independent Contractors and Scholarships by Country.
For Employee payments please contact your divisional payroll office.

Visa Restrictions:    See Visa Restrictions and Resources

Withholding

All non-payroll payment to Nonresident Aliens (NRA) require tax withholding at rates as follows unless a tax treaty between the Nonresident Alien (NRA)’s country and the United States applies to the payment.  Below are applicable tax rates by payment types:

  • Scholarships/Fellowships: 14%
  • Non-scholarships/fellowships, except royalties: 30%
  • Royalties: See IRS Tax Treaty Table 1

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Calculation of Amount Withheld

Federal tax must be withheld at the rate of 30% of gross pay unless a tax treaty is applicable to the type of payment being made.  Withholding on scholarships and fellowships is reduced to 14%.  Withholding rates may also be reduced according to tax treaties, and many tax treaties entirely exempt scholarship and fellowship payments.

Federal tax calculation is made by Accounting Services audit staff or by a division.  The following examples demonstrating calculation of amounts withheld are presented here for UW internal staff information only:

Example 1. A royalty is paid in the amount of $1,000 to a resident of Paraguay.  The United States does not have a IRS Tax Treaty Table 1 with Paraguay and the recipient has not claimed exemption from withholding, so withholding is at the rate of 30%. Accounting Services withholds $300 (30% of $1000) and remits it to the IRS.  A check for $700 is mailed for the royalty payment.

Example 2. A royalty is paid in the amount of $1,000 to a resident of Latvia. According to the IRS Tax Treaty Table 1 between the United States and Latvia, royalties are subject to a 10% reduced withholding rate. The recipient has filed form W-8BEN to claim the lower rate. Accounting Services withholds $100 (10% of $1000) from the payment.

Example 3. A resident of Nigeria performs services for a university department in the amount of $1000 over a period of 10 days.  The United States does not have a tax treaty with Nigeria and the recipient has not claimed exemption from withholding. Accounting Services withholds $300 (30% of $1000) and remits it to the IRS.  A check for $700 is mailed for the services payment.

Example 4. A $2000 scholarship payment is made to a student who is a resident of Brazil.  The United States has no tax treaty with Brazil and the student has not claimed exemption from withholding.  Accounting Services withholds $280 (14% of $2000) and remits it to the IRS. A check for $1720 is mailed for the scholarship payment.

Withholding amounts are calculated based on information provided on the payment request documentation (PIR, DP, P.O., etc.).  As the examples indicate, withholding depends on a variety of circumstances.  Departments can help assure accuracy of withholding amounts by providing complete information on the payment request form and supporting documentation (PIR, DP, P.O., etc.).

With each payment, a remittance copy of the voucher is produced by Accounting Services. This document will include a statement to notify the individual that taxes were withheld and remitted to the Internal Revenue Service. A telephone number to contact in case of error will be included.

Refund of over withholding

If the individual believes taxes were withheld from a payment in error, they should be instructed to contact the Tax Compliance Office (jose.carus@wisc.edu).  If it is determined that taxes were withheld in error, the Tax Compliance Office will issue a refund check to the individual.  EXCEPTION:  If the error is found after the end of a calendar year that year or for a prior calendar year payment, it will not be possible for the Tax Compliance Office to obtain a refund for the overpayment from the IRS and issue a check to the individual.  The individual would then be required to file a tax return and obtain a refund directly from the IRS.  It is, therefore, very important that vendors contact the Tax Compliance Office regarding potential errors immediately, especially when payment is made near the end of a calendar year.  These errors should be reported to the Tax Compliance Office no later than December 31.

Reporting

See Federal and State Tax Reporting for full details.

How to Apply for the Individual Taxpayer Identification Number (ITIN)

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What is an ITIN?

An ITIN is a tax processing number that is issued by the Internal Revenue Service (IRS) for individuals who are not eligible for a Social Security Number (SSN), such as a foreign national or nonresident alien, but are required to file certain federal tax or information returns.  For SSN eligibility please refer to Social Security Number for Noncitizens.

No individual should have both an ITIN and an SSN.

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued to nonresident Aliens (NRA) by the Internal Revenue Service.  It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit.  Effective April 12, 2011, the range was extended to include 900-70-0000 through 999-88-9999, 900-90-0000 through 999-92-9999 and 900-94-0000 through 999-99-9999.  IRS issues ITIN’s to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).

ITIN’s are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code (IRC).

Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN.

References           

What is an ITIN used for?

ITIN’s are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITIN’s to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs).  For SSN eligibility please refer to Social Security Number for Noncitizens.

An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

References

Who needs an ITIN?

IRS issues ITIN’s to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs.   For SSN eligibility please refer to Social Security Number for Noncitizens.  A Nonresident Alien (NRA) individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN.

Other examples of individuals who need ITIN’s include:

  • A nonresident alien required to file a U.S. tax return
  • A U.S. resident alien (based on days present in the United States) filing a U.S. tax return
  • A dependent or spouse of a U.S. citizen/resident alien
  • A dependent or spouse of a nonresident alien visa holder

If you are being put on the UW’s payroll please ask your school’s divisional payroll coordinator for your taxpayer identification requirements.  Also refer to How to make employee payments to determine if you are considered an employee of the UW.

If you already have obtained or applied for either an SSN or ITIN then you are not eligible for the other as both are U.S. Taxpayer Identification Number and a person is only allowed to have one of these numbers, never both.

Reference:

How do I know if I need an ITIN?

If you do not have a SSN and are not eligible to obtain a SSN, but you have a requirement to furnish a federal tax identification number or file a federal income tax return, you must apply for an ITIN.  For SSN eligibility please refer to Social Security Number for Noncitizens.

Reference

Can I apply for an ITIN if I already have an ITIN or SSN?

No unless your ITIN or SSN is expired and you have received notification from the IRS or Social Security Administration that your ITIN or SSN is expired.

By law, an alien individual cannot have both an ITIN and a SSN.

If you have an application for an SSN or ITIN pending, do not attempt to apply again for either an SSN or ITIN.

Reference:

Are ITIN’s valid for Identification?

No. ITIN’s are for federal tax reporting only, and are not intended to serve any other purpose.

Reference:

How to Apply for an ITIN?

Option 1:  Applying through UW IRS ITIN Certified Acceptance Agent (CAA):

  • UW-Madison Accounting Services does ITIN applications as a courtesy service to the university community to avoid having to send visitors to the local Internal Revenue Service (IRS) office as required by the IRS.
  • Appointments are required if you are applying through the UW.
  • No walk-in appointments.
  • Before an ITIN application appointment can be set the following must be done by the applicant:
    1. Complete and sign the Individual Taxpayer Identification Number (ITIN) Form.
    2. Scan and e-mail the completed and signed Individual Taxpayer Identification Number (ITIN) Form to the Tax Compliance Office (Jose A. Carus, Jr. (Tax Compliance Manager) at jose.carus@wisc.edu).
    3. Once the Tax Compliance Office receives the Individual Taxpayer Identification Number (ITIN) Form they will (1) provide further instructions on the document required for the ITIN appointment, and (2) work with you to schedule an appointment.Special Note: Please note that the Internal Revenue Services (IRS) only allows the UW IRS ITIN Acceptance Agent (CAA) to apply for Individual Taxpayer Identification Number (ITIN) for to people that the UW makes payments to.The ITIN’s are only for tax reporting purposes so we can only assist you in applying for an ITIN if a payment is made by the UW.  If you need to apply for the ITIN for tax purposes or other than for a payment made by the UW, the original completed tax return must be submitted with the ITIN application therefore you cannot apply through the UW as the UW cannot accept responsibility for your original tax return.  In this case you must apply through an IRS office directly.  See section titled Applying through the Local Internal Revenue Service (IRS) Office Directly.

Option 2:  Applying through the Local Internal Revenue Service (IRS) Office Directly:

You can also apply for the ITIN at local Internal Revenue Service Office.  See IRS Office Locator for more information.

Option 3:  Applying through the Internal Revenue Service (IRS) Office via mail:

Follow the instructions at How do I apply for an ITIN.   Use the latest revision of Form W-7, Application for IRS Individual Taxpayer Identification Number to apply.  Attach a valid federal income tax return, unless you qualify for an exception, and include your original proof of identity or copies certified by issuing agency and foreign status documents.

Because you are filing your tax return as an attachment to your ITIN application, you should not mail your return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send your return, Form W-7 and proof of identity and foreign status documents to:

Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

You may also apply using the services of an IRS-authorized Acceptance Agent or visit some key IRS Taxpayer Assistance Center in lieu of mailing your information to the IRS in Austin.  Taxpayer Assistance Centers (TACs) in the United States provide in-person help with ITIN applications on a walk-in or appointment basis.  Applicants outside the United States should contact U.S. Tax Attachés in Beijing, Frankfurt, London, or Paris.  The IRS’s ITIN Unit in Austin issues all numbers through the mail.

Reference:

Immigration and Tax Documentation (Includes samples)

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Passport

Passports are a document issued to citizens and nationals of a country.  They are issued exclusively by the issuing country’s Department of State.

All payment made by the UW to a Nonresident Alien (NRA) require a legible copy of the picture page pf the passport.  The passport must be current and cannot be expired.

Image of sample passport

I-94 (Issues to Non-Visa waiver Program Countries)

An I-94 form is needed by all persons except U.S. Citizens, returning resident aliens, aliens with immigrant visas, and most Canadian citizens visiting or in transit.  Air and Sea travelers will be issued an I-94 during the admission process at the port of entry. Visit site for more information: https://i94.cbp.dhs.gov/I94/#/home

Effective April 30, 2013, the U.S. Customs and Border Protection (CBP) create an electronic I-94 system and also stamp the passport with an admission stamp containing the date of admission, class of admission, and expiration date.

Although CBP will no longer issue a paper I-94, many employers and government agencies, such as the Department of Motor Vehicles and the Social Security Administration, require a paper version of Form I-94 to verify lawful status and employment authorization.  This includes the University of Wisconsin which requires an I-94 to verify lawful status in the U.S. as part of our payment process.

If the NRA does not have an I-94, the NRA must retrieve and print out a paper version of their arrival information from www.cbp.gov/I94.  The information should be available online within 24 hours after arrival.

The NRA must provide the paying entity (1) the paper version of their arrival information (I-94), and (2) the Homeland Security Stamp in their passport for their current trip to the U.S.  These documents must be attached to all the Accounting Services payment request form and supporting documentation (PIR, DP, P.O., etc.), along with the photo page of the passport, and other documents as outlined in Process and Document Flowchart for Non-Scholarship/Fellowship Payments. Includes U.S. Individual Taxpayer Identification Number (ITIN) application process in order for payments to be processed.

Sampel image of a I-94 form

 

ESTA for Visa Waiver Program Countries

If the Nonresident Alien (NRA) is from a Visa waiver Country they must obtain the equivalent of the I-94, which is the Electronic System for Travel Authorization (ESTA).

The Visa Waiver Program (VWP) enables nationals of certain countries to travel to the United States for tourism or business for stays of 90 days or less without obtaining a visa.  The program was established in 1986 with the objective of promoting better relations with U.S. allies, eliminating unnecessary barriers to travel, stimulating the tourism industry, and permitting the Department of State to focus consular resources in other areas.  VWP eligible travelers may apply for a visa, if they prefer to do so. Not all countries participate in the VWP, and not all travelers from VWP countries are eligible to use the program. See https://esta.cbp.dhs.gov/esta/ for further details on the ESTA program and participating countries.

All VWP travelers must submit an application to U.S. Homeland Security using the Electronic System for Travel Authorization (ESTA).  The cost of this application as of 04/20/2011 is $14. The VWP traveler enters their personal information into ESTA and, if approved by ESTA, the VWP traveler is given an ESTA authorization document.  This ESTA Authorization document is normally valid for two years at which time the VWF traveler must re-apply through ESTA. The authorization document can also be viewed and printed from the ESTA web page at https://esta.cbp.dhs.gov/esta/ by the applicant by entering certain personal information (first name, family name, date of birth, passport number, and country issuing passport).

The NRA must provide the paying entity (1) the paper version of their arrival information (I-94), and (2) the Homeland Security Stamp in their passport for their current trip to the U.S.  These documents must be attached to all the Accounting Services payment request form and supporting documentation (PIR, DP, P.O., etc.), along with the photo page of the passport, and other documents as outlined in Process and Document Flowchart for Non-Scholarship/Fellowship Payments. Includes U.S. Individual Taxpayer Identification Number (ITIN) application process in order for payments to be processed.

Image of ESTA for Visa Waiver Program Countries form

VISA

A citizen of a foreign country who seeks to enter the United States generally must first obtain a U.S. visa, which is placed in the traveler’s passport, a travel document issued by the traveler’s country of citizenship.

Form I-20 (Certificate of Eligibility for Nonimmigrant Student Status

All F and M students that study in the United States need a Form I-20, “Certificate of Eligibility for Nonimmigrant Student Status.” Once accepted into a Student and Exchange Visitor Program (SEVP)-certified school, international students will receive a Form I-20 from their designated school official (DSO).

Image of Form I-20

Form DS-2019 (Certificate of Eligibility for Nonimmigrant Student Status)

The DS-2019 Form is the document that allows you to apply for the J-1 Visa as an Intern or Trainee in the USA. The DS-2019 form is also called “Certificate of Eligibility”. It is issued to you by CICD, a US Department of State-designated sponsor organization.

Form DS-2019 , “Certificate of Eligibility for Exchange Visitor (J-1) Status” is a Department of State controlled document that can only be produced through the Student and Exchange Visitor Information System (SEVIS). SEVIS is the Department of Homeland Security database developed to collect information on the F, M and J visa holders. The Form DS-2019 is the basic document required to support an application for an exchange visitor visa (J-1). It is a 2-page document. Foreign nationals are required to sign page one of the form agreeing to the instructions and certification language relating to participation in the exchange program found on page two.

No blank SEVIS forms exist. Each Form DS-2019 is printed with a unique identifier known as a “SEVIS ID number” in the top right-hand corner, which consists of an “alpha” character (N) and up to 11 numerical characters (E.g. N0002123457).

The Form DS-2019:

    • Identifies the participant (block 1);
    • Identifies the sponsor (block 2 and block 7, which contain the name, signature and telephone number/address of the sponsor’s responsible officer);
    • Provides a brief description of the program activity to be completed by the participant (block 2);
    • Identifies the beginning and end dates of the program (block 3) and the program category (block 4); and
    • Provides a breakout of the total estimated financial support to be provided to the participant during his or her program (block 5).

 

 

Image of Form DS-2019

Invitation Letter Sample

An invitation letter is a letter issued the paying entity in the United States to the visiting Nonresident Alien (NRA) in which the details of the visit and any associated payments are outlined.  This letter should be issue to all Nonresident Aliens (NRA) in order for them to take it to the United States embassy or consulate to apply for and obtain a visa to enter the United States.

SAMPLE:  Below is a Sample Invitation Letter to be used for Nonresident Alien (NRA) guests coming to the UW to be guest speakers/presenters at events.  Please customize the letter with your department letterhead, etc.

[Enter Date Here]

Dear Honored Guest,

The University of Wisconsin is pleased to invite you to be a guest speaker at the [Enter Event Name Here].  As part of this invitation, the University of Wisconsin will be providing you a payment for services (Honorarium) in the amount of $[Enter Amount here].  The UW will also reimburse you for travel expenses including airfare, lodging, and meal based on our Travel Accountable Plan.

In order to receive the above payments, you are required to obtain the appropriate Visa from the United States Embassy in your country.   Please visit or call the United States Embassy in your country and take this letter of invitation with you. Based on the letter please ask for a B-1 (Business) Visa for your trip to the University of Wisconsin.  Please consult the United States Embassy in your country for appropriate lead time required to obtain your visa as lead time varies from country to country.

If you are from a Visa Waiver Program (VWP) Country this program allows citizens of participating countries to travel to the United States without a visa for stays of 90 days or less, when they meet all requirements.  Travelers must be eligible to use the VWP and have a valid Electronic System for Travel Authorization (ESTA) approval prior to travel. If you are eligible to travel on the VWP, but prefer to have a visa in your passport, you may still apply for a visitor (B) visa.  To determine if you are from a Visa Waiver Country please visit https://esta.cbp.dhs.gov/esta/ for a description of the program and a listing of the countries participating in this program and the Electronic System for Travel Authorization (ESTA) requirements you must complete before you come to the United States.

Once you get to the United States, the University of Wisconsin host department will need to see your original (1) passport and (2) I-94 or ESTA Authorization if from Visa Waiver County.  Please provide the originals to the paying department and they will make copies of these documents. The department may also request other payment documents, such a receipts, etc. which they will inform you of prior to your visit to the University of Wisconsin.

We hope you accept this invitation and are looking forward to having you at the University of Wisconsin.

Sincerely,

[Enter Department Signature, etc. here]

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21 North Park Street
5th Floor, Room 5352
Madison, WI 53715

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Jose A. Carus, Jr.
Tax Compliance Manager
Email: jose.carus@wisc.edu

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Phone: 608-262-0582