All Foreign Nationals living, visiting, working, or studying in the U.S. are responsible for compliance with United States laws and regulations. The Internal Revenue Service (IRS), the U.S. government taxing authority, has issued strict rules regarding the taxation and reporting of payments made to non-United States citizens. As a result, San Francisco State University (SF State) may be required to withhold U.S. income tax and file reports to the IRS in connection with payments made by SF State to students, faculty, staff or guests who are not U.S. citizens or permanent resident aliens (green card holders) and who receive financial aid, scholarships, fellowships, awards, travel reimbursements or compensation for services performed.
Federal Tax Treatment
SF State must determine whether a foreign national will be treated as a “resident alien” or a “nonresident alien” for U.S. tax purposes. The Substantial Presence Test is used to calculate the number of days that a foreign national is present in the U.S. and determine whether the individual is a nonresident alien or resident alien for purposes of calculating U.S. tax withholding. Students present in the U.S. on F-1 or J-1 visas are usually considered to be nonresident aliens for the first five calendar years (J-1 non-students for two years) that they are present in the U.S. SF State is generally required to withhold taxes from all payments made to nonresident aliens. In order for SF State to make the determination, all nonresident aliens must complete the Foreign National Information Form. SF State is also required by law to report to the IRS all payments made to nonresident aliens, or to a third party on his or her behalf, regardless of whether the payment is subject to U.S. tax.
Taxable and Nontaxable Items
Payments of non-taxable Items include:
- Tuition
- Book Allowance
- Required Registration Fees
- Mandatory Health Insurance
- Scholarships Paid to Students
Taxable items include, but are not limited to, the following:
- Room and Board
- Fellowship Stipend (which does not require a service to be performed)
- Living Allowance
- Cash Award
- Travel Payment/Reimbursement
- Compensation (including a fellowship stipend that does require a service to be performed)
Tax Treaties
The U.S. maintains income tax treaties with over 56 different countries. Certain taxable payments made by SF State to a foreign national may be exempt from U.S. tax based on an income tax treaty entered into between the U.S. and the foreign national's home country. In order to be considered for a tax treaty exemption, you must satisfy the Federal exemption set forth in the tax treaty: you must complete all the appropriate federal forms.
State Tax Treatment
California state law does not mirror the federal law when it comes to taxing non-U.S. citizens; the state of California does not recognize the federal level tax treaty. California income is taxable and subject to withholding for state purposes, irrespective of a federal exemption. California does not distinguish among U.S. citizens, U.S. residents, or nonresident aliens with respect to California state income tax withholding. Pursuant to California Revenue Taxation Code Section 17951, taxable income for nonresidents includes only the income from sources within California. San Francisco State University does withhold state personal income tax from individuals. The amount to withhold is dependent on the California state residency status of the individual.
For Assistance
Office of International Programs, Office of Student Financial Aid, Human Resources, Safety and Risk Management, Tax Specialist, and campus departments will assist nonresident aliens with the appropriate steps needed to comply with both the Federal and State tax-withholding requirements. If you have additional questions about how to complete the required forms or need information concerning tax withholding requirements, please contact the Tax Specialist at (415) 338-2325.
Common Terms and Definitions:
Resident Alien for Tax Purposes: An individual who has met or passed the substantial presence test or has been granted lawful permanent residence in the U.S. as permanent resident alien. A resident alien is taxed on his/her worldwide income and in the same manner as a U.S. citizen.
Nonresident Alien for Tax Purposes: An individual who has not met or passed the substantial presence test or has not been granted lawful permanent residence in the U.S. as permanent resident alien. A nonresident alien is taxed only on his/her income from U.S. sources, using special tax withholding, reporting, and filing guidelines different than those applied to U.S. citizens and resident aliens for tax purposes.
Green Card Test: A U.S. residency status test used to determine whether a non-U.S. citizen will be treated as a resident alien for U.S. tax purposes. An individual satisfies the test, if he/she is granted lawful permanent residence in the U.S. as an immigrant by the Immigration and Naturalization Service, and is issued an alien registration card (often called a green card). Substantial Presence Test: A mathematical calculation comprised of two parts; the 31-day test and the 183-day test. An alien must be physically present in the U.S. for at least 31 days during the current calendar year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that to pass the test -- counting:
- All the days present in the current year, and
- 1/3 of the days present in the first preceding year, and
- 1/6 of the days present in the second preceding year.
Exempt Individual: An individual who is exempt from counting days of presence for the Substantial Presence Test. Students temporarily present in the United States under an F, J, M, or Q visa and who substantially comply with the requirements of the visa are exempt individuals for no more than five calendar years. Note: This term has nothing to do with whether the individual will be exempt from having federal income tax or Social Security and Medicare taxes withheld, or filing a U.S. tax return.
Purpose
In order to comply with Federal (Internal Revenue Service and Treasury Department) and State (Franchise Tax Board) rules and regulations, each SF State department must comply with these procedures when employing nonresident aliens. The Chancellor’s Office requires SF State campuses to comply with the Internal Revenue Code, California Revenue and Taxation Code, and California State University polices and procedures regarding nonresident alien taxation issues. These procedures are intended to outline each campus department’s responsibility when employing/appointing nonresident alien faculty, graduate teaching associates, graduate assistants and special consultants. These procedures for nonresident aliens are in addition to all current hiring/payment procedures required by Human Resources, Safety, & Risk Management (HRS & RM).
Procedure and Responsibility
Step 1
Campus Department
Upon recommending a candidate for a staff position, complete all required appointment/hiring forms and forward the forms to Human Resources, Safety, and Risk Management - - Employment Unit, who will contact the candidate to make the official job offer.
Step 2
Human Resources, Safety, and Risk Management Department
The Employment Representative will:
- Make the job offer to the candidate (employee) recommended by the Department.
- Request the employee to pick up and complete a hiring packet in the Human Resources, Safety, and Risk Management Department – ADM 252 and make an appointment with one of the two Employment Representatives to go through the new hire process and benefit information.
- Determine if the newly appointed staff (employee) is a “US Citizen or Permanent Resident Alien or Nonresident Alien” by administering the Federal Form I-9 -- “Employment Eligibility Verification”. All newly hired employees must already have a Social Security Number or an Individual Taxpayer Identification Number (ITIN). The Employment Representative is responsible for obtaining and verifying appropriate documents and certifying the I-9.
The employee is responsible for completing Section 1 of the I-9. The employee must determine his/her residency status in the United States by selecting one of the boxes under the statement, “I attest, under penalty of perjury, that I am (check one of the following):”
- A citizen of the United States
- A noncitizen national of the United States
- A lawful permanent resident (Alien # ___)
- An alien authorized to work until (Alien # or Admission # _______________until (expiration date, if applicable - month/day/year) ___/___/___
If the employee is a “US Citizen or National, or Permanent Resident Alien (“green card holder”)”; the Employment Representative will follow usual departmental and Human Resources, Safety, and Risk Management employment practices/procedures.
5. If the employee is “An Alien” (nonresident alien) the Employment Representative will provide and request the alien to complete a “SF State Foreign National Information Form”--
All nonresident alien employees must complete this form (designed to collect information necessary to determine the US tax residency status of non-US citizens) before receiving any type of payment(s) and/or disbursement(s), including a paycheck, from San Francisco State University:
Request the nonresident alien employee to complete the rest of the new hire paperwork with the exception of the Employee Action Request (EAR) form:
- Direct the nonresident alien employee to schedule a meeting with the Tax Specialist to discuss his/her tax residency status, tax withholding requirements and Federal tax treaty benefits; and BRING the following documents to his/her appointment with the Tax Specialist.
- SF State Foreign National Information Form along with all the required supporting documents stated on the form:
- Passport page showing picture, name, and number;
- U.S. Visa;
- I-94 Form “Arrival and Departure Record” (a small white card inside the passport);
- FORM I-20 or DS2019 or EAD card (Employee Authorization Card).
- Social Security or ITIN Card.
- Employee Action Request (EAR) form (the form should be blank). The Tax Specialist will assist in completing this form: In order to ensure that all information required to make the proper tax determination and to minimize any delays in analyzing, the Employment Representative should inform the NRA employee to be sure to bring all the documents and forms required.
Step 3
Internal Audit
At the meeting with the NRA employee, the Tax Specialist will:
A. Review and discuss the SF State Foreign National Information Form along with all the supporting documents. The Tax Specialist will determine the nonresident alien employee’s tax residency status, the applicable income tax withholding rate, and whether some or all of the wages of the employee are exempt from income and FICA tax withholding under a federal income tax treaty.
B. Request the employee to complete the Employee Action Request (EAR) form based on whether any tax treaty benefit is available to the employee. The EAR is San Francisco State University’s version of the IRS Form W-4 (Employee’s Withholding Allowance Certificate). California tax regulations do not mirror federal tax regulations; therefore the appropriate withholding of California taxes will be recommended. California does not recognize any federal tax treaty exemptions.
C. Stamp the EAR form (yellow copy) with the appropriate Federal and State tax withholding information. The stamp also indicates that the Tax Specialist has discussed Federal and State tax withholding rates with the nonresident alien employee.
If the NRA employee requests a different State tax withholding rate than the Federal rate, the employee will need to indicate this change on the Employee Action Request form, Box E. II. (Special Treatment of State Allowances). If the NRA employee does not request Special Treatment of State Allowances, the Federal rate will be used as indicated in Box E. I. of the Employee Action Request form. Request the employee to bring the completed EAR form back to the appropriate Employment Representative in Human Resources, Safety, and Risk Management.
Step 4
Human Resources, Safety, and Risk Management Department
The Employment Representative will complete the hiring process.
The procedures above are the steps needed to employ and pay a nonresident alien staff. The above procedures do not fully describe the entire process but do outline the necessary steps each department needs to adhere to. Should a campus department need further clarification on the above procedures or need additional information regarding employing nonresident alien staff, they should contact Young Kim, Tax Specialist at (415) 338-2325. These procedures were developed in conjunction with the Employment Unit of Human Resources, Safety, and Risk Management.
Purpose
In order to comply with Federal (Internal Revenue Service and Treasury Department) and State (Franchise Tax Board) rules and regulations, each SF State department must comply with these procedures when employing nonresident aliens. The Chancellor’s Office requires CSU a campuses to comply with the Internal Revenue Code, California Revenue and Taxation Code, and California State University polices and procedures regarding nonresident alien taxation issues. These procedures are intended to assist campus departments when employing nonresident alien student assistants. These procedures for nonresident aliens are in addition to all current hiring/payment procedures required by Human Resources, Safety & Risk Management (Human Resources, Safety, and Risk Management).
Procedure and Responsibility
Step 1
Campus Department
Upon selecting a student assistant candidate, send the student to the Office of Student Financial Aid (OSFA) to complete the Federal form I-9, Employment Eligibility Verification form.
Step 2
Office of Student Financial Aid
The Office of Student Financial Aid (OSFA) will determine whether the student assistant is a Nonresident Alien (NRA) by administering the Federal I-9 Employment Eligibility Verification form (EEV).
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If the student assistant is a US Citizen or Permanent Resident Alien and Green Card Holder, OSFA will complete the certification of the I-9 and refer the student back to the department along with OSFA’s EEV.
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If the student assistant is a neither US Citizen nor Permanent Resident Alien and Green Card Holder, OSFA will complete the Federal form I-9, issue OSFA’s EEV with the work authorization expiration date, provide the student assistant an SF State Foreign National Information Form (FNIF) to complete along with supplying the appropriate documents: Passport page showing picture, name, and number; U.S. Visa; I-94 Form “Arrival and Departure Record” (a small white card inside the passport); FORM I-20 or DS2019; Social Security or ITIN Card, and direct the student to make an appointment with the Tax Specialist.
Campus Departments
If a student IS NOT identified as a Nonresident Alien, the department should follow the usual process in completing and processing the student’s hiring paperwork, e.g. Student Payroll Action Request (SPAR) form.
Step 3
Internal Audit
At the meeting with the NRA student assistant, the Tax Specialist will:
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Review and discuss the SF State Foreign National Information Form along with all the supporting documents. The Tax Specialist will determine the nonresident alien employee’s tax residency status, the applicable income tax withholding rate, and whether some or all of the wages of the employee are exempt from income under a federal income tax treaty.
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Provide and have the student assistant complete an Student Payroll Action Request (SPAR) form and the "CSU Form SSA-1945: Statement Concerning Your Employment in a Job not covered by Social Security".
Step 4
Upon completion of all the forms required, the Tax Specialist will:
Stamp on SPAR form the appropriate tax withholding information, then:
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Forward the completed forms: Student Payroll Action Request (SPAR) form and "CSU Form SSA-1945: Statement Concerning Your Employment in a Job not covered by Social Security" to Human Resources, Safety, and Risk Management - - Payroll Unit . Give the student assistant the original “OSFA EEV”, green copy of the SPAR form, CSU Form SSA-1945, and request he/she take the forms back to their department to complete the hiring process.
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If the student becomes a Resident Alien for tax purposes (RA), the Tax Specialist will send the originals of the following forms: SPAR, CSU form SSA-1945, and EEV to the hiring department through the Student Assistant.
Step 5
Campus Department
The campus department will complete the hiring process by processing a 107 (Appointment Form) document and submitting it to the Payroll Unit of Human Resources, Safety, and Risk Management. until the department has completed the training for E-TRAC Student Hires. Payroll must be submitted on the form 672 (Attendance Form) and not the form CD048 for NRA Students. In order to process pay rate changes for NRA Students a new 107 or Student E-TRAC must be submitted to change the pay rate. These procedures were developed in conjunction with the Payroll Unit of Human Resources, Safety, and Risk Management.
Note: For NRA Students: the OSFA EEV expires at the end of each semester. For a continuing Student Assistant position, an NRA student assistant must renew OSFA's EEV form, and visit the Tax Specialist's office with the new OSFA’s EEV to concurrently renew SPAR form and CSU Form-SSA 1945.
Purpose
In order to comply with Federal (Internal Revenue Service and Treasury Department) and State (Franchise Tax Board) rules and regulations, each SF State department must comply with these procedures when making Accounts Payable payments honorarium recipients who are considered nonresident aliens for tax purposes. The Chancellor’s Office requires CSU campuses to comply with the Internal Revenue Code, California Revenue and Taxation Code, and California State University policies and procedures regarding nonresident alien taxation issues. These procedures are intended to assist campus departments when making payments to nonresident aliens.
Procedure and Responsibility
Step 1
Campus Department or Project Director:
The campus department or project director must determine if the recipient (payee) is a US Citizen, Permanent Resident or Nonresident Alien (NRA) by administering the Vendor Data Form STD. 204:
Administer the Vendor Data Form STD. 204 (required by Accounts Payable before any payment can be processed). The form is available online at:
- If the payee indicates on the Vendor Data Form STD. 204, Box 4 – Vendor Residency Status that he/she is a US Citizen or Permanent Resident Alien (“green card holder”) for Federal tax purposes,the department or project director will follow usual departmental and Accounts Payable payment procedures.
- If the payee indicates or provides information on the Vendor Data Form STD. 204, Box 4 – Vendor Residency Status that he/she is a NRA for Federal tax purposes.
Step 2
The Department or Project Director will:
- Review the Stipend Payment Authorization Form and; If the project is funded by Office of Research and Sponsored Programs (ORSP) grant [see Part I, Line 4, Dept.#3080 or #3138 on the Stipend Appointment Form]. Send the Stipend Appointment Form and Vendor Data form STD. 204 to the respective Grant Administrator in ORSP. The Grant Administrator will work with the Tax Specialist accordingly.
- For all other non-ORSP projects, provide and request the NRA to complete a “SF State Foreign National Information Form” (FNIF). All NRA payees must complete this form (designed to collect information necessary to determine the US tax residency status of non-US citizens) before receiving any type of payment(s) and/or disbursement(s).
- Instruct the NRA payee to schedule a meeting with the Tax Specialist to discuss his/her tax residency status, tax withholding requirements and Federal tax treaty benefits; and BRING the following documents to his/her appointment with the Tax Specialist:
- SF State FNIF with required supporting documents stated at the top of the form;
- Stipend Payment Authorization Form, and;
- Vendor Data Form STD. 204.
Step 3
Tax Specialist will:
- Review the documents and information on Vendor Data Form STD. 204, Stipend Appointment form, SF State FNIF with all the required supporting documents stated on the top of this form;
- Determine whether some or all of the payment(s) are exempt under a federal income tax treaty; and,
- Based on the information provided, determine the classification of the payment, payment for services or taxable scholarship. The Tax Specialist will stamp Vendor Data Form STD. 204 and the Stipend Appointment form with the applicable tax withholding information.
These two forms will be forwarded to the campus department or project director through the stipend recipient.
Step 4
The Campus Department or Project Director will:
- For a non-SF State student NRA payee – forward the Vendor Data Form STD. 204 and Stipend Payment Authorization forms to Accounts Payable.
- For a SF State student NRA payee – forward the Vendor Data Form STD. 204 & Stipend Payment Authorization forms to the Office of Student Financial Aid (OSFA), who in turn will forward the forms to Accounts Payable. OSFA is required to record the stipend amount the student will receive.
For Research and Sponsored Program (RSP) Accounts: All forms - Vendor Data Form STD. 204 and Stipend Payment Authorization form must be returned to ORSP, who will forward the forms to the appropriate department for processing - Accounts Payable and/or ORSP (see above Step 1 - 3A or 3B).
As a reminder, ORSP must authorize all payment requests for stipends chargeable to ORSP accounts PRIOR to the activity or event taking place. NOTE: The above procedures do not fully describe the entire process but do outline the necessary steps that campus departments or project directors need to adhere to. Should a campus department or project director need further clarification on the above procedures or need additional information regarding making payments to NRA stipend and honorarium recipients, they should contact Tax Specialist, Young Kim at (415) 338-2325.