Written by Kimberly Martin, Tax Compliance Accountant.
This month’s Finance Division Knowledge Base spotlight is on honorarium payments for foreign nationals.
In very limited circumstances, foreign nationals in F-1 status may receive an honorarium.
For example:
- Foreign nationals in H-1B status cannot be paid an honorarium.
- J-1 scholars may receive an honorarium for delivering a lecture if permitted by the visa-sponsoring institution. A confirmation letter stating that sponsor approval for payment would be required for non-NC State scholars. For NC State scholars, please contact tax_compliance@ncsu.edu.
Foreign nationals in B-1, B-2, VWB or VTW status may accept an honorarium or reimbursement of travel expenses under specific conditions:
- The activity is an usual academic activity or activities.
- The visit to the university is nine days or less.
- The individual has accepted such payment from no more than five educational or research institutions (including the university) in the previous six-month period.
Taxes for Foreign National Honorariums
An honorarium paid to a foreign national is subject to 30% federal tax withholding. If the payment exceeds $1,500, the withholding increases to 34% (including 4% North Carolina income tax withholding).
Receipted travel reimbursement is generally not subject to withholding because it is not considered income. The federal tax withholding can be reduced from the honorarium payment, or the department may pay the federal withholding tax on behalf of the supplier.
Income Reporting for Foreign National Honorariums
In January, following the calendar year end, the university provides the foreign national with a 1042-S form, which reports the income and tax withheld. The foreign national must use this form to report their U.S. income when filing their tax return.
Whether the foreign national is required to file a U.S. tax return depends on their specific situation:
- If the foreign national’s total U.S. income (including the honorarium) exceeds the minimum filing threshold, they must file a tax return.
- If their income is below the threshold, they may not be required to file but it’s advisable to consult a tax professional.
Summary
In summary, receiving an honorarium and a 1042-S form means that the foreign national should evaluate their U.S. tax obligations. They should consult with their tax advisor to ensure they are in compliance with tax laws and regulations.
To set up a new supplier, departments will send the supplier a PaymentWorks invitation to register and upload their tax documentation. Tax Compliance will send a separate Sharebase email to the supplier for additional documentation that cannot be uploaded into PaymentWorks.
For B-1, B-2, VWB and VWT visa status, a Compliance Statement will need to be completed and signed by the department head or designee. The supplier will also need to sign the compliance statement and upload it using the provided Sharebase link.