An acceptance agent is usually an entity (such as IU) which has made a written agreement with the IRS to help foreign visitors obtain Individual Taxpayer Identification Numbers (ITINs) or Employer Identification Numbers (EINs) from the IRS. IU is an acceptance agent for ITINs. It can assist with completing the ITIN application and can certify that it has inspected the official documents required by the application.
Candidate for a Degree
For tax purposes, a candidate for a degree is broadly defined by IRS to include any full-time or part-time student enrolled at an institution that grants degrees. Every IU student, whether or not his or her particular educational program leads to a degree or is labeled degree, non-degree, or certificate, is therefore a candidate for a degree.
Form DS-2019 is a document that supports a J-1 visa. The form is prepared for students or scholars by the university or organization that is acting as sponsor. Generally, foreign visitors receive this form abroad and take it to a U.S. consulate when they apply for a J-1 visa. Box 3 on the form shows the period for which the form is valid. Box 4 will identify whether the holder is a student, a professor, a research scholar, or a short-term scholar. Other options are available; these are the most common at IU.
A wage is monetary compensation paid by an employer (IU) to an employee in exchange for work done. Services performed by an employee are subject to the direction and control of the university, its faculty, or staff. Employee wages are not the same as payments made to a foreign visitor for independent contractor payments.
Fellowships and Scholarships
Fellowship or scholarship payments are made to assist someone in pursuing a course of study or research. Fellowship or scholarship payments made to foreign visitors may include a combination of the following:
- Tuition, fees, books, and course-related materials
- Stipends for living expenses including meals, lodging, and other personal items
- Medical insurance premiums paid to insurance companies
- Air fare purchases from airline companies or travel service providers
Even if they are called fellowships, payments made to individuals for providing a service to the university are considered by IRS to be employee wages, not fellowships. Any amount of a fellowship or scholarship that is paid in exchange for employment-related services, including teaching and research services, is taxable unless a tax treaty exclusion applies.
Post-doctoral fellowship awards are made to individuals to further their pursuit of a course of study or research beyond the doctoral level. The entire post-doctoral fellowship award must be included in taxable income. And nonresident aliens are subject to income tax withholding.
FICA is short for the Federal Insurance Contribution Act. FICA tax is assessed against employee wages paid to individuals who are either US citizens or resident aliens for tax purposes. FICA tax is separate from federal income tax and is used to fund the retirement and medical benefits paid by the Social Security Administration. One half of this tax (7.65% of wages) is withheld from payments to the individual. An equal amount is paid by the university. Nonresident aliens and students are not subject to this tax.
Form I-20 is a document that supports an F-1 visa. Only students receive an I-20. The form is published by the Immigration and Naturalization Service and prepared for IU students by Indiana University. Generally, new students receive this form abroad and take it to a U.S. consulate when they apply for an F-1 visa. Box 2, identifies the name of the university; for IU students, Indiana University must be indicated here. Items 3 and 4 indicate the degree and course of study of the student and the period that the form is valid. Authorization for on-campus work is not noted on the I-20. Authorization for off-campus curricular practical training is noted on Page 3 of the I-20. Authorization for optional practical training is also noted on Page 3 of the I-20, but the student must also show a valid EAD.
Immigrant (Resident Alien for Immigration Purposes)
An immigrant, or resident alien for immigration purposes, is a "green card" holder and is often referred to as a permanent resident. An immigrant, or resident alien, is a non-U.S. citizen who has been authorized to live and work in the U.S. indefinitely.
Independent Contractor Payments
Independent contractor payments are made for services performed by foreign visitors when those services are outside the scope of employment. Independent contractors are not employees. In order for an individual to be treated as an independent contractor and not an employee, all of the following tests must be met:
- The foreign visitor must not be under the direction or control of the university, its faculty, or staff, in regard to the means and method that are being used to perform services for the university.
- The service or task being performed is of short duration and will not result in the foreign visitor entering a long-term working relationship with the university.
- A written contract or agreement exists that identifies the services that are to be performed.
- Typical independent contractor payments are for an honorarium.
Internal Revenue Service
The Internal Revenue Service (IRS) is the U.S. government agency (part of the Department of the Treasury) that collects taxes. The IRS issues various forms-withholding allowance certificates, income tax returns, and so on-which are used to collect information from foreign visitors and help them calculate and pay the taxes that apply to them. The IRS is also the part of the U.S. government that determines how much you owe in taxes, and whether an organization that pays income to a foreign visitor is required to withhold specific amounts from that income.
Nonimmigrant (Nonresident for Immigration Purposes)
A nonimmigrant, or nonresident for immigration purposes, is a person who is not a citizen or permanent resident (“green card” holder) of the U. S. and has been admitted to the U.S. for a temporary stay that will end when the purpose of that stay has been met. A student in status on an F-1 visa is an example of a nonimmigrant.
Nonresident Alien (for Tax Purposes)
A nonresident alien for tax purposes is a person who is not a U.S. citizen and who does not meet either the "green card" test or the "substantial presence" test described in IRS Publication 519, U.S. Tax Guide for Aliens.
Resident Alien (for Tax Purposes)
A resident alien for tax purposes is a person who is not a U.S. citizen and who meets either the "green card" test or the "substantial presence" test described in IRS Publication 519, U.S. Tax Guide for Aliens.
Any money paid to a foreign visitor or paid to a third party on the visitor's behalf on which taxes are required to be paid to the U.S. government is called taxable income. Employee wages, independent contractor payments, and stipends are examples of taxable income. Tax will determine the required taxes to be withheld from payments made to foreign visitors.
Taxes are payments to the U.S. government by individuals earning money in the United States. Taxes are used to support the various functions of the U.S. government. Foreign visitors who receive US taxable income during the calendar year will need to compute an annual tax filing report Form 1040NR.
Travel (Transportation, Meals and Lodging in Transit)
Travel payments can be made to foreign visitors in payment for, or reimbursement of, a number of travel-related expenses including the cost of meals, lodging, transportation costs such as air fare and automobile rental, and other related expenses incurred while in transit. There is no distinction between amounts paid directly to travel service providers, such as airlines, and payments made directly to the foreign visitor.
Immigration customer service functions are performed by a division of the Department of Homeland Security. Enforcement responsibilities are centered in the new Bureau of Immigration and Customs Enforcement (BICE). The Bureau of Customs and Border Protection (BCBP) includes U.S. Border Patrol and immigration inspections border enforcement programs. These bureaus set the restrictions for most visa categories. The Department of State sets the regulations for the J exchange visitor visa program.
U.S. law generally requires that income tax and social security tax be paid before wages are given out to the employee. Indiana University, by law, must subtract required taxes from an employee's pay before it pays the employee. When you receive a paycheck or direct deposit notice from the university, the stub will tell you how much has been withheld to pay each tax. The university sends the amounts withheld to the U.S. government, as required by law.
Withholding is based on an estimate of what an individual's tax will be. When you complete your tax return, if more taxes have been withheld than you owe, you can claim a refund. If the IRS agrees that you have computed your tax correctly, it will pay you the amount of the appropriate refund, either by check or electronic funds transfer. If less tax has been held than you owe, you must pay the amount that you owe when you submit your return. If the amount is large, you may have to pay a penalty.