Foreign travelers coming to the United States to conduct temporary business such as business meetings, consultations, conventions and conferences, need visitor visas unless they qualify for entry under the Visa Waiver Program. You can learn more about business travel to the US on a B-1 visa. For instructions on how to apply, visit the Department of State.
Employment, whether it’s full-time or part-time, is not permitted in B-1 status, and individuals may not collect a salary. Study is permitted but must be short-term and for recreational purposes only.
Honorarium Payments or Reimbursement of Travel Expenses to International Guests
A scholar may be permitted to receive an honorarium payment for usual academic activities if the activity meets the following criteria:
- The activity lasts no longer than nine days, including weekends and holidays
- The honorarium is for services for the benefit of Montclair State University
- The visitor has not accepted such payments or expenses from more than five institutions over the past six months.
Montclair State University is permitted to reimburse visitors for travel expenses incidental to the visit. Reimbursement may be per diem or for individual expenses.
Please be advised that all determinations on payments to visiting foreign nationals are made on a case-by-case basis. Even a small difference in an individual’s circumstances can dramatically alter the tax and/or immigration law situation.
Taxes
A foreign national in B-1 tourist or VWP (Visa Waiver Program) status is legally permitted to accept an honorarium payment and/or reimbursement of expenses without violating U.S. Immigration law. However, this is a separate issue from whether the foreign national has to pay taxes on the payment. In the eyes of the IRS, income is income regardless of whether it is in the form of an honorarium, or payment for services, or a reimbursement of expenses, such as travel. It is not uncommon for a university to pay a speaker for travel expenses (airfare, hotel, etc), but not compensate the speaker for his or her services. There is no law to prevent a university from doing this, but the payment is not considered a tax-free gift to the speaker; it is income.
Tourist, B-1 or VWP scholars who are the recipients of an honorarium and/or an expense reimbursement are considered engaged in self-employment activities for U.S. income tax purposes. Self-employed tourists may be exempt from tax under the Self-employment Income Article of an applicable income tax treaty. Most treaties have these provisions. This assumes that the visitor is a nonresident alien. The only way to accurately determine whether someone is a nonresident alien is to have the person run their information through Sprintax tax software. It is crucial to use Sprintax because Sprintax will tell Montclair State University about specific tax forms that need to be completed when a person is from a particular country. For example, Sprintax often creates an honorarium statement that the foreign national will need to claim a treatise exemption. It also creates a record based on the data that is entered; if an individual returns to Montclair State University in the future, there will be an accurate record that can be built upon in Sprintax.
U.S. tax law includes procedural requirements that must be met in order to benefit from treaty exemptions from withholding taxes. In order to claim an exemption from tax on income (either employment or self-employment), the recipient is required to submit a completed and signed Form 8233. To be valid, the form must include a U.S. taxpayer identification number- SSN or ITIN. The payor (Montclair State University) must review and sign the Form 8233 and submit it to the IRS at the address provided in the form’s instructions. B-1 and VWP recipients of an honorarium or reimbursement and other self-employed individuals must submit a Form 8233 through each payor.
ITINs are impossible to get prior to the time that a visitor files a tax return with the IRS. While, in theory, there is a procedure for requesting an ITIN pre- tax return, the truth is that ITINs are never granted pre-tax return. Additionally, the Social Security Administration does not provide a receipt letter for ITIN applications (as they do for Social Security numbers). The only way to obtain an ITIN is to file a tax return. Accordingly, foreign nationals cannot avail themselves of treatise benefits until after they have filed at least one tax return and actually obtained an ITIN.
Honorarium recipients all receive a Form 1042S from Montclair State University by March 15. They must have 30% withholding reported on the Form 1042S (unless they submit a Form 8233 and an ITIN). Failure to do so can lead to significant university liability in the case of an audit, and audits are not infrequent. Montclair State University is bound by these regulations.
In sum, an honorarium or reimbursement of an expense can be paid to a foreign national without an ITIN. But it that case, taxes (30%) must be withheld. If the recipient wants to invoke his/her right to get the payment tax-free under a treatise, he/she must obtain an ITIN. They will not be able to get an ITIN until they have filed their first U.S. tax return (Montclair State will provide Form 1042Ss by March 15, enabling a visitor to file a tax return).
Procedure for International Scholars without SS#
- Contact travel@gxitma.net to request an invitation to the Sprintax system. Provide name and email address.
- Sprintax will invite the individual to create an account and enter screening information into the Sprintax system to determine their tax liability.
- Prepare a new Supplier Create form for the scholar. A W8-Ben will be required.
- Prepare a supplier invoice in Workday for the honorarium (with a copy of event publicity and invitation letter),. Since there is neither an SSN nor an ITIN, tax will probably be withheld.
- Prepare an Expense report in Workday for any travel reimbursement with receipts and a copy of the invitation letter. In order to prepare the Expense report, the visitor must first be created as an External committee Member. A form can be found in Workday Resources under the Accounts Payable tab. Forward the completed form to travel@gxitma.net.