Payroll Services

Taxation Pointers Non U.S. Citizens

DATE: 06.18.2004
FROM: Lowell G. Hancock, Internal Revenue Service
TO: All Subscribers Aliens-L Listserv

For your information, in February, 2004 the Office of IRS Chief Counsel issued the statement below with respect to ITIN's for NRA Recipients of Honoraria.

Thank you.

Lowell G. Hancock
Badge # 50-24286
IRS SB/SE TEC Area 3 (International)
Lowell.G.Hancock@irs.gov


Academic Honorarium for B Nonimmigrant Aliens and the New Individual Taxpayer Identification Number (ITIN) Process

Generally, a citizen of a foreign country who wishes to enter the United States must first obtain a visa, either a nonimmigrant visa for temporary stay or an immigrant visa for permanent residence. The visitor visa is a nonimmigrant visa for persons desiring to enter the United States temporarily for business (B-1) or for pleasure or medical treatment (B-2). Colleges and universities frequently make honorarium payments to individuals for academic activities not involving employment. Most honorarium recipients enter the United States in an immigration category which does not allow employment. Consequently, the visitors are not entitled to Social Security Numbers and, therefore, must obtain an Individual Taxpayer Identification Number (ITIN) for U.S. tax purposes. Individuals in B status will not be required to obtain a rejection letter for a Social Security Number from the Social Security Administration.

B visa holders can enter the United States in one of the following immigration categories:

  • B-1, Visitor for Business
  • B-2, Visitor for Pleasure
  • Visa Waiver for Business - VWB
  • Visa Waiver as a Tourist - VWT
  • Canadian entering without inspection

B-1 and B-2 visitors enter on a Visa that is a travel document which is inserted into the individual's passport. The U.S. has agreements with approximately 24 countries that allow foreign visitors to enter the U.S. on a 90-day card under the Visa Waiver Program. The Form I-94, Arrival/Departure Record, describes the terms and conditions of the individual's stay in the United States. The length of stay is recorded on an I-94 card put into the visitor's passport and can vary in length from a few days to six months.

B-1 and VWB visitors may be reimbursed for travel expenses under the immigration rules. In addition, B visitors in the above categories, who satisfy the B honorarium rules, may be paid an honorarium and reimbursed for incidental expenses. Generally, B visitors are typically nonresident aliens under the section 7701(b) rules on substantial presence because of the limited amount of time they spend in the United States.

Who Qualifies?

Visitors holding B visas and individuals qualifying for admission under the Visa Waiver Program may accept honoraria and payment of associated expenses. However, if the academic activity is arranged before the visitor travels to the

U. S., the visitor must seek admission under the B-1 visa or the corresponding WB (Visa Waiver/Business), rather than under the B-2 visa or its corresponding WT (Visa Waiver/Tourist). In contrast, if the academic activity is arranged while a B-2 or WT visitor is already in the United States, she/he may accept the honorarium under the existing B-2 or the WT.

Professor/Lecturer/Speaker: Members of the academic profession coming to the United States to engage in usual academic activities such as lecturing, may travel on a B-1 visa provided there is no remuneration from a U.S. source, other than expenses incidental to the visit.

Conference: Participants in scientific, educational, professional, or business conventions, conference or seminars may travel to the United States on a B-1 visa. The B-1 visa is also the appropriate visa classification to present a paper at the conference, provided there is no remuneration from a U.S. source other than expenses incidental to the stay. Anyone who will receive an honorarium in addition to incidental expenses may still be eligible for the B-1 visa.

Researcher: A person traveling to the United States to engage in independent research will require a B-1 visa provided there is no remuneration from a U.S. source and the results of the research will not benefit the American institution. Those who will receive payment from a U.S. source and/or the U.S. institution will benefit from the results of the research.

Those who will receive an honorarium in addition to incidental expenses may still be eligible for the B-1 visa provided all of the following are met:

  • the activities will last no longer than nine days at a single institution;
  • the institution is a nonprofit research organization or a governmental research organization, or an institution of higher education, or a related or affiliated nonprofit entity;
  • such activities are conducted for the benefit of the institution or entity; and
  • the researcher has not accepted such payment or expenses from five such institutions during the previous six month period;
  • If the proposed activities are not exactly as described, an exchange visitor (J-1) or temporary work (H-1) visa will be required.

Academic Honorarium

Visitors admitted to the U.S. under B visas and the Visa Waiver Program may accept honoraria and payment of associated incidental expenses for usual academic activity for the benefit of the paying entity. The honorarium-paying entity must be an institution of higher education, a nonprofit research organization or a Government research organization. The academic activity may not last longer than nine (9) days at any single institution. Additionally, honoraria and associated expenses may not be accepted from more than five (5) institutions or organizations during a 6-month period. Thus, the visitor is limited to a maximum of 45 possible days of academic activity during a 6-month period. Finally, the visitor must not have accepted honoraria or payment for expenses from more than five (5) institutions or organizations in the previous 6-month period.

The INS (now the United States Citizenship and Immigration Service) has recently proposed new rules to implement these provisions (Federal Register, May 30, 2002) as summarized below:

What is an "honorarium"?

Under the proposed rule, an honorarium is defined as a payment of money or other thing of value to a person for her/his participation in a usual academic activity for which no fee is required. The value of an honorarium may be any dollar amount with no minimum or maximum. An honorarium is not a salary or any other compensation for services rendered on a continuing basis. "Associated expenses" mean reimbursements or payments for travel costs, lodging, meals, uniforms, or supplies.

"Usual academic activity" means activity conducted for the benefit of the honorarium-paying institution and includes lecturing, teaching, consulting, conducting research, attending meetings, symposia or seminars, or otherwise sharing knowledge. Readings and performances are included academic activities, so long as the activity is open without charge to the public and/or students.

What constitutes a "single institution"?

The term "single institution" applies to an entity that has branches or campuses in more than one location. For purposes of applying the 9-day limit, if the visitor is providing an identical service at more than one location of the institution during the 9-day period and is given one honorarium payment, this will be considered one activity. In contrast, if the visitor is providing different activities at different branches or campuses and the different branches or campuses are paying separate honorarium payments for the visits, then each visit to each branch or campus will be considered a separate visit, calculated against the maximum of five allowed activities within the 6-month period.

What is the taxation of honorarium payments?

An honorarium paid to or on behalf of a nonresident alien is subject to a 30 percent withholding tax on the gross amount. All taxable U.S. source income and withheld taxes and/or withholding allowance for deductions, if any, are reportable on Form 1042-S, Foreign Persons US Source Income Subject to Withholding.

An honorarium payment is a payment for non-employee services performed in the United States. As such it is treated as income effectively connected to a U.S. trade or business on the individual's Form 1040NR tax return and taxed at graduated rates. Such income is reduced by the personal exemption amount on the tax return under Section 873(b) (3).

What are the new ITIN procedures for honorarium recipients?

Under the Social Security Administration regulations governing social security numbers (SSNs), only individuals authorized to work in the United States under the immigration laws are authorized to obtain an SSN. Individuals in B status are not authorized to work and, therefore, cannot obtain a SSN, and must obtain an ITIN.

Application for IRS Individual Taxpayer Identification Number PDF format 103KB, 4 Pages
 
 
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