|Policy Title||Extension of Tax Treaty Benefits to Nonresident Alien Students, Faculty, and Staff|
|Responsible Office||Human Resources|
|Policy Type||Personnel and Payroll|
|Last Revision Date||9/15/2023|
The United States has negotiated tax treaties with many other countries in the world. Individuals who are neither citizens nor permanent residents of the United States may be able to claim exemption from or a reduced rate for withholding on certain types of income.
- Employee Compensation
- Scholarship, Fellowship, or Grant Payments
An individual may claim a reduced Federal income tax withholding of federal tax rate pursuant to a tax treaty if: (1) there is a treaty in effect between the U.S. and the individual's country of residence; (2) all of the requirements as set forth in the treaty are satisfied; and (3) all required tax treaty exemption forms are completed and sent to the University Tax Treaty Specialist for University review and submission to the IRS, if applicable.
Binghamton University may extend tax treaty benefits to those who are eligible under provisions of a tax treaty. The policy will be facilitated using the SUNY payroll system provided through the Office of the State Comptroller (OSC) payroll system. Binghamton University utilizes specialized tax treaty software in making eligibility decisions.
The Human Resources office will be the point of contact for all questions. The International Tax Treaty Specialist will be responsible for counseling employees and scholarship recipients regarding potential eligibility for tax treaty benefits.
Income tax treaties between the U.S. and other countries may reduce or eliminate Federal income tax withholding for fellowship payments, royalty payments, or compensation payments received by students, trainees, teachers, researchers and independent contractors. Each treaty is distinct and may contain time and/or dollar limits. The existence of an income tax treaty between the U.S. and another country does not automatically exempt an individual from income tax withholding; the individual must satisfy all of the qualifications as set forth in the treaty and must complete and submit all required tax treaty exemption forms to the Human Resources Office (International Tax Specialist area) for review and submission to the IRS, if applicable. A list of foreign countries with which the United States has tax treaty agreements can be found on the IRS website (https://www.irs.gov/) along with the text of those agreements.
U.S. immigration regulations (now under the jurisdiction of the U.S. Citizenship and Immigration Services [USCIS] of the U.S. Department of Homeland Security [DHS]) govern the types of payments that can be made to individuals who are neither citizens nor permanent residents of the U.S. IRS and Treasury Department rules govern the Federal income and Social Security tax withholding and reporting rules related to payments in accordance with USCIS rules. With respect to this policy, it is important to distinguish between the roles of the USCIS and the IRS applicable to these payments.
This policy and the accompanying University procedures are designed to facilitate a process for paying international students, scholars, faculty or staff members who are permitted to receive a monetary payment or payments — whether in the form of a scholarship or compensation as an employee.
The Office of the State Comptroller (OSC) payroll system will serve as the tool to extend tax treaty benefits to eligible international individuals. The system, known as PayServ, applies to scholarship holders or employees receiving compensation.
For Employees Receiving Compensation:
As a result of communication with department and dean's offices, the Human Resources Office will notify potentially eligible international students, faculty and staff of the initial need to enter relevant information into the Foreign National Information System (FNIS). FNIS is a part of the Tax Navigate software used for this purpose and this information should be entered before they begin their work. The data entered into FNIS will be analyzed and a determination made as to eligibility for these benefits. If required, the software will create the tax forms for the person to sign and submit as required by law. Some forms must be completed and forwarded to the IRS; some are kept on file in the HR Office at Binghamton University. FNIS will also be used to determine tax benefit changes whenever critical employment circumstances change, including extensions, changes in workload effort, etc. Human Resources will monitor eligibility for all international persons in the database to assure they are extended benefits as appropriate or that benefits are terminated as per law.
For Scholarship Holders:
Human Resources will work with other University offices including the Graduate Office, Student Accounts Office, Athletics Office, Financial Aids Office, Business Office and others to acquire the names of non-resident alien students who are scheduled to receive scholarships each semester.
A review of these scholarship recipients will then be made by the International Tax Treaty Specialist within Human Resources to determine the portion of the fellowship/scholarship that is taxable (the unqualified portion). Generally, the unqualified portion of the fellowship/scholarship will be the monies that represent room, board, travel, and some fees. A Certified Public Accountant in the Business Office will assist as needed in determining if a specific charge or fee type not previously identified should be classified as qualified or unqualified.
For athletes receiving scholarships, Human Resources will then process the unqualified portion of the fellowship/scholarship through the PayServ (fifth payroll) system to produce a net check for the student at agreed upon dates for the academic year or semester. Checks will be signed over by the student to the Student Accounts Office and used to pay any outstanding University expenses. Any excess monies will then be refunded to the student via a check from Student Accounts. Payments will generally be made in October, February, and May of the academic year; however, these dates are estimates. This timing will allow Human Resources to adjust the taxable portion of the fellowship/scholarship if circumstances exist to do so.
Further, Human Resources will work with Athletics personnel in a separate process whereby they may be able to identify additional funds to help cover taxation losses experienced by scholarship holders in athletics. Athletics personnel will also work in partnership with the Student Accounts Office regarding how the student account will be credited and debited as appropriate.
For scholarship recipients from departments and the Graduate School, a similar process will be followed. The Graduate Office will provide a list of international scholarship recipients, Human Resources will review the amounts to determine the non-qualified, taxable portion and then process that through the PayServ (fifth payroll) system. The net check that results will be routed through the Student Accounts Office.
The International Student and Scholar Services Office will provide non-resident students and scholars with free income tax preparation software in late January of each year to assist in meeting tax filing requirements.
Tax Treaty Specialist, 607-777-6950