Overview
Guidance on tax and taxation policy for non-residents (both CA and US/federal) receiving payment from UCSF.
How UCSF pays non-resident aliens
Two types of payments can be made to non-resident aliens who are not employees:
- Honoraria - UC Accounting Manual D-371-35
- Travel expense reimbursement - Travel Regulations, UC Policy G-28
These payments may be subject to withholding based on applicable federal and California State tax laws and regulations.
Applicable tax laws
Federal (IRS) Tax Laws
IRS Publication 901- U.S. Tax Treaties provides direction on making payments to residents of foreign countries, and describes when it is allowable to exclude these payments from Federal income tax withholding. If the U.S. does not have a tax treaty with the payee’s country of tax residence, or if the U.S. has a tax treaty but the individual does not provide both the ITIN (SN) and 8233 Form (Exemption from Withholding on Compensation for Independent Personal Services), then UCSF Accounts Payable must withhold 30% from the payment and remit it to the IRS.
List of Countries with Tax Treaties
See the IRS website for a list of U.S. Income Tax Treaties. If a country is listed but has no treaty article cited, contact Accounts Payable for instructions.
California (CA) State Withholding Tax Laws
The UC Accounting Manual directs that honorarium payments to residents of foreign countries who perform services in California or who received income from California sources are subject to State income tax withholding. Non-California residents, including U.S. citizens who are residents of other states, are subject to State income tax withholding of 7% of gross if the total payments excel $1,500 during the calendar year. See State of California Franchise Tax Board publication FTB Publication 1017, Resident and Nonresident Tax Withholding Guidelines for more details.
Example of California State withholding:
| Date / Description | Amount |
|---|---|
| April 1, 2015 - First honorarium payment | $500 |
| August 15, 2017 - Second honorarium payment | $1,100 |
| Total 2015 payments to date | $1,600 |
| 7% withholding on $1,600 | $112 |
| Net payment | $988 |
| October 1, 2015 - Third honorarium payment | $600 |
| 7% withholding on $600 | $42 |
| Net payment | $558 |
How to treat tax withholding
Gross-Up of Amount
If withholding is required, departments have the option of “grossing up” the payment amount requested so that the individual will receive the full amount promised in the net payment.
Gross-Up Example
- A $250.00 honoraria payment would be grossed up to $357.14 if total calendar year payments are less than $1,500. Federal withholding of 30% is required.
- A $250.00 honoraria payment would be grossed up to $376.14 if total calendar year payments have exceeded $1,500 requiring 30% Federal and 7% CA State withholding.
Summary of Applicable Withholding
| Tax Treaty? | Visitor holds document types: | Withholding from honoraria payments: | Withholding from travel reimbursement payments: |
|---|---|---|---|
| Country with Tax Treaty | If the visitor has Doc-A and Doc-B only |
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| If the visitor has Doc-A, Doc-B, Doc-C, and Doc-D |
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| Country without Tax Treaty | If the visitor has Doc-A, Doc-B, and Doc-C (if available) |
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Required documentation for non-resident aliens
Doc-A: Proof of Visa Status or I-94 (Arrive-Departure document completed by Customs Agent when entering the US; visa type is usually noted on this document)
Doc-B: Certificate of Academic Activity
Doc-C: Social Security Number (SSN), Individual Taxpayer ID Number (ITIN), or Application for IRS Individual Taxpayer Identification Number (W-7)
Doc-D: IRS 8233 Form (Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual)