The Internal Revenue Service (IRS), the U.S. government tax authority, has issued strict regulations regarding the taxation and reporting of payments made to non-United States citizens. As a result, the Marine Biological Laboratory (MBL) may be required to withhold U.S. income tax and file reports with the IRS in connection to payments made by MBL to individuals who are not U.S. citizens or permanent resident aliens (green card holders) and who receive financial aid, scholarships, fellowships, awards, or compensation for services performed.
The MBL must determine whether you will be treated as a “resident alien” or a “nonresident alien” for U.S. tax purposes. The substantial presence test is used to calculate the number of days that an individual is present in the U.S. and determine whether the individual is a nonresident alien or resident alien for purposes of calculating U.S. tax withholding. MBL is generally required to withhold taxes from all payments made to nonresident aliens.
In order for MBL to make this determination, you must submit information through the Foreign National Information System (FNIS). This automated system determines the necessary tax forms and withholding for your stay at the MBL. Also the MBL is required by law to report to the IRS all payments made to a nonresident alien that are subject to U.S. tax.
Taxable items include, but are not limited to, the following:
- Room and Board
- Fellowship Stipend (which does not require a service to be performed)
- Living Allowance
- Cash Award
- Travel Payment/Reimbursement
- Compensation (including a fellowship stipend that does require a service to be performed)
Nontaxable items consist of the following:
The U.S. maintains income tax treaties with over 50 countries, and certain taxable payments made by MBL to you may be exempt from U.S. tax based on an income tax treaty entered into between the U.S. and your country of residence. The existence of a tax treaty does not automatically ensure an exemption from taxation; rather you must satisfy the requirements for the exemption set forth in the tax treaty. A taxpayer identification number is required before tax treaties can be honored. In order to be considered for a tax treaty exemption, you must complete and submit information through FNIS. If an exemption exists, you will be asked to complete and sign Form W-8BEN (for all scholarship, fellowship, or stipend payments) or Form 8233 (for all compensation payments).
U.S. Tax Information for Foreign Nationals
Tax Withholding on Scholarships, Fellowships and Stipends
If you receive a scholarship or fellowship, the amount will not be paid directly to you, but will be credited to your personal account at MBL. Any tax withheld will be deducted directly from your personal account. F, J, M or Q visa holders with a taxpayer identification number may use Form MBL W-4 to reduce withholding on scholarships and fellowships under Internal Revenue Procedure 88-24. The Financial Services Administrator can provide you with additional information and will assist you with this process
A 14 percent withholding tax will be deducted from scholarship, fellowship, and stipend payments made to individuals present in the U.S. under an F-1, J-1, M-1, or Q visa who are from countries that do not maintain an income tax treaty with the U.S., or whose payment does not qualify for exemption under an income tax treaty. A 30 percent withholding tax will be deducted if the individual is present in the U.S. under any visa not stated above.
Tax Withholding on Honoraria and Other Forms of Compensation
A 30 percent withholding tax will be deducted from compensation payments made to individuals present in the U.S. under any type of visa who are from countries that do not maintain an income tax treaty with the U.S., or whose payment does not qualify for exemption under an income tax treaty. A taxpayer identification number is required before tax treaties can be honored.
Tax Withholding on Employee Paychecks
U.S. tax is withheld on this type of payment at a specific graduated tax withholding rate. A Social Security number is available to all work-authorized nonresidents as permitted by their visa and the receipt for an application for a Social Security number must be provided at the time of employment.
A Special Note to B-1/B-2 and WB/WT Visitors
To pay an academic honoraria to an individual present on a B-1/B-2 or WB/WT visa the following criteria must be met:
- The academic activity can last no longer than 9 days;
- The individual has not accepted an honoraria or reimbursement of expenses from more than five (5) institutions or organizations in the previous six (6) months;
- The individual has provided a U.S. Social Security Number or ITIN;
- The individual has signed a statement attesting to having met the criteria listed above.
To reimburse expenses to an individual present on a B-1/B-2 or WB/WT visa the following criteria must be met:
- A business purpose for the visit must be established;
- The visitor must substantiate the expenses claimed to MBL within a reasonable amount of time;
- The visitor must return any amounts to MBL that is over and above the substantiated business expenses within a reasonable amount of time.
If you are already in the United States at another institution you will, in most cases, need prior approval from the International Office at the other institution to receive compensation for services from MBL. Please contact the International Office at your home institution or the MBL’s Foreign National Coordinator, email@example.com for more information.
Financial Services Administrator
Marine Biological Laboratory
7 MBL Street
Woods Hole, MA 02543 USA
Office Location: Homestead 212
Telephone: (508) 289-7275
Fax: (508) 289-7931