Payments to Students and Fellows
Below are the most common types of payments made on behalf of or to non-resident alien students and fellows (for a discussion of treatment of payments to U.S. citizens, green card holders and resident aliens for tax purposes go here):
Remember, that a payment is always preceded by discussions on the right Visa status and the documentation required. Treaty benefits can only be given if a social security number or individual taxpayer identification number is available and other restrictions are met. Please always include the Tax Office in your preliminary discussions before sending a check request to Accounts Payable.
Financial Aid
... is defined as Qualified Aid = Tuition and Required Fees (for degree students only - non-degree students do not receive qualified aid). For Middlebury College this means tuition is a percentage of the comprehensive fee (as defined by the Bursar's Office) + Student Activity Fee + Physical Education Fee + Health Insurance. For the Monterey Institute this includes Tuition + Student Activity Fee + Technology Fee + Health Insurance;
... is defined as Non-Qualified Aid = all payments received through the Accounts Payable Department and all aid that is not Qualified Aid;
... is processed through the Financial Aid offices in Middlebury and Monterey. Financial Aid is first applied towards tuition and required fees. It is then applied towards room and board unless it is specifically for travel, internship support etc. Any funds left are returned to the student via a refund check;
... is taxed by the College / Institute and the tax is charged to the students' account on behalf of the IRS. The tax rate is generally 30%, unless the student is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... is reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS. Only the non-qualified portion of financial aid is reported on Form 1042S;
... is reported by you on Form 1040NR or 1040NR-EZ. Only the non-qualified portion of financial aid needs to be reported on your tax return.
Internship Support
... is processed through the Career Services Office in Middlebury and individual departments in conjunction with the Financial Aid Office in Monterey. Payments to students are made via checks;
... is taxed by the College / Institute and the tax is subtracted from the students' check on behalf of the IRS. The tax rate is generally 30%, unless the student is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... is reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... is reported by you on Form 1040NR or 1040NR-EZ.
NOTE: Internship support through the New Millennium Internship Fund goes directly to the local corporation that hires a Middlebury Intern. The local corporation is then responsible for any reporting and withholding of the monies distributed to the intern by them. The College does not report nor withholds on those funds.
Fellowships
... include, but are not limited to, visa fees, mileage, car rental, gas for car rental, toll, parking, air fare, train fare, bus fare, taxi fare, hotel, housing, utilities for housing, hospitality, meals, tuition, site visits, special events, conference registration, office supplies, postage, photocopies, printing, binding, per diem payments;
... are processed through individual departments in Middlebury / the Institute. Payments of per diems and reimbursements are made via checks, all other cost are generally paid directly to airline, housing, etc.;
... are taxed by the College / Institute and the tax is subtracted from the fellows' check on behalf of the IRS. The tax rate is generally 30%, unless the fellow is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents; NOTE: If the fellowship program is sponsored by a third party, the College / Institute can only sustain from taxing and reporting if it has proof that the third party will tax and report. Generally, the U.S. person who pays the item of U.S. source income to a foreign person (or to its agent) must withhold.
... are reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS (see exception for third party payments above);
... are reported by you on Form 1040NR or 1040NR-EZ.
Senior Work Funds
... are processed through the Dean of College Office in Middlebury and individual departments. Payments to students are made via checks;
... are taxed by the College / Institute and the tax is subtracted from the students' check on behalf of the IRS. The tax rate is generally 30%, unless the student is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... are reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... are reported by you on Form 1040NR or 1040NR-EZ.
Wage
... see the section on payments to employees.
Travel Funds
... are processed through the Financial Aid offices in Middlebury and Monterey or through individual departments. Usually, airplane tickets etc. are purchased by the College / Institute on behalf of students directly. Sometimes, students or parents are reimbursed for some travel expenses via Accounts Payable check;
... are taxed by the College / Institute and the tax is charged to the students' account or subtracted from the reimbursement check on behalf of the IRS. The tax rate is generally 30%, unless the student is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... are reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... are reported by you on Form 1040NR or 1040NR-EZ.
SEVIS Fees
... are processed through the International Student and Scholar Services Office in Middlebury or Monterey. Usually, the SEVIS fee is paid directly by the College / Institute via credit card on behalf of the student / fellow;
... are taxed by the College / Institute and the tax is charged to the students' account or subtracted from a check on behalf of the IRS. The tax rate is generally 30%, unless the student is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... are reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... are reported by you on Form 1040NR or 1040NR-EZ.
Deans Grants (for Immediate Living Expenses, etc.)
... are processed through Commons Offices at the College and paid to students via checks;
... are taxed by the College / Institute and the tax is subtracted from the students' check on behalf of the IRS. The tax rate is generally 30%, unless the student is on a F, J, M, or Q visa, which then drops the tax rate to 14%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate to 0%. If no treaty benefit applies you might be eligible to use the alternative withholding procedure as discussed in Publication 515, page 21 which might also reduce your tax rate to 0%. Because the flat tax rate of 30% or 14% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... is reported by the College / Institute on Form 1042S with income code 15, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... is reported by you on Form 1040NR or 1040NR-EZ.
Health Insurance
... is processed through the Financial Aid offices in Middlebury and Monterey and paid directly to the provider;
... is NOT taxed by the College / Institute on behalf of the IRS or by the IRS;
... is NOT reported by the College / Institute as it is considered Qualified Aid;
... is NOT reported by you on Form 1040 or 1040NR.
Travel funds for Conference Presentation / Poster based on research work at Institute / College
... are processed through the academic departments at the College and the Institute and paid to students via checks or paid directly to the provider;
... are NOT taxed by the College / Institute as they are considered reimbursable under the accountable plan rule;
... are NOT reported by the College / Institute as they are considered a service to the College / Institute;
... are NOT reported by you on Form 1040NR or 1040NR-EZ.
Prizes
... are processed through Commons Offices at the College and individual departments at the Institute and paid to students via checks;
... are taxed by the College / Institute and the tax is subtracted from the students' check on behalf of the IRS. The tax rate is generally 30%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate up to 0%. Because the flat tax rate of 30% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... are reported by the College / Institute on Form 1042S, Income Code 50 as miscellaneous income, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... are reported by you on Form 1040NR or 1040NR-EZ.
Gambling Winnings
... include, but are not limited to, winnings from lotteries, raffles, horse races, and casinos. They include cash winnings and also the fair market value of prizes such as cars and trips;
... are processed through Commons Offices at Middlebury College and paid to students via checks;
... are taxed by the College / Institute and the tax is subtracted from the students' check on behalf of the IRS. The tax rate is generally 30%. Depending on the last tax residence of the student, a treaty benefit might apply dropping the tax rate up to 0%. Because the flat tax rate of 30% is rather high, the IRS often gives you a tax refund once you file a tax return depending on your total income for the calendar year. 30% tax is applied to anybody who does not submit the Foreign National Information Form or the required documents;
... are reported by the College / Institute on Form 1042S, Income Code 50 as miscellaneous income, exemption code 00 if no treaty benefits have been applied, exemption code 04 if treaty benefits have been applied and send to you and the IRS;
... are reported by you on Form 1040NR or 1040NR-EZ.
Payments made for Anything Abroad
... are processed through Accounts Payable Offices at the College / Institute and paid to students via checks;
... are NOT taxed by the College / Institute as these payments are considered foreign source.;
... are NOT reported by the College / Institute on any IRS Form as they are considered foreign source;
... are NOT reported by you on Form 1040NR or 1040NR-EZ.
Payments made from Student Organization Funds
... are processed through Accounts Payable Offices at the College / Institute and paid to students via checks;
... are NOT taxed by the College / Institute as these payments are funded through the student activity fee;
... are NOT reported by the College / Institute on any IRS Form as they are funded through the student activity fee;
... are NOT reported by you on Form 1040NR or 1040NR-EZ.
Expense Reimbursements from Consulting Class
... include, but are not limited to, mileage, car rental, gas for car rental, toll, parking, travel meals, hospitality, conference registration, memberships, publications, telephone expense, office supplies, postage, photocopies, printing, binding;
... are processed through Accounts Payable and paid to students via checks, students need to submit original receipts and signed check request;
... are NOT taxed by the College / Institute on behalf of the IRS or by the IRS;
... are NOT reported by the College / Institute on any tax form as they are reimbursements under the accountable plan rule;
... are NOT reported by you on Form 1040NR or 1040NR-EZ.
Last Updated: October 26, 2009
