Tax Responsibilities

University Responsibilities

UNCSA is responsible for maintaining compliance with both the letter and intent of all federal, state and local laws. The University also has a responsibility to the foreign nationals who come to campus to pursue their education or other scholarly activities and to ensure that payments made are properly reported to the appropriate federal and state agencies. Proper reporting greatly reduces the potential for future tax or immigration problems for foreign nationals.

Withholding and Reporting

The University is responsible for appropriate withholding and reporting of all payments to foreign nationals. Where a payment is "US Source Income", the University is required to report that payment on a Form 1042-S and may be required to withhold at the applicable rate, unless the foreign national claims the benefit of a tax treaty. Withholding occurs on the gross amount of the payment (for example, if the University agrees to pay $1,000 to a foreign national, and such payment is subject to withholding at a rate of 30%, UNCSA will pay $700 to the foreign national and $300 to the IRS). 

Where withholding is required, a department may elect to "gross-up" the payment, in order to ensure that the foreign national receives the amount that the foreign national expected to receive from UNCSA. If a payment is "grossed-up", the new total payment amount is equal to (Amount to be Received by Foreign National)/(1- withholding rate, expressed as a decimal). In order to pay a foreign national $1,000, the total cost would be $1,428.57 ($1,000/(1-0.30)). 70% of $1,428.57 ($1,000) would be paid to the foreign national, and 30% of $1,428.57 ($428.57) would be paid to the IRS, as required by law. 

Note: it is a common misconception that the 30% withholding is calculated on the amount that is paid directly to the foreign national. Instead, the 30% is calculated on the total amount to be expended by UNCSA.  

Sponsoring Department Responsibilities

University departments that host foreign nationals will generally be aware in advance of the actual arrival date that the visitor will be coming to the university. Accordingly, the hosting department or faculty member bears primary responsibility for ensuring that the visitor acquires the correct visa (or has the correct visa) so that payments made are in compliance with all requisite tax and immigration laws. Departments must ensure that no payment of any kind is made to a foreign national unless the individual has been granted the appropriate authorization and visa status in advance of their arrival.

The Controller’s office must be contacted prior to making any contractual arrangement to pay a foreign national on an F-1 or J-1 visa. This applies to both non-student and student foreign nationals and must be done in order to ensure that immigration laws are not violated. Such violations could lead to fines of up to $10,000 for the University as well as detention or deportation of the foreign national.

Foreign Tax Procedures Guide