Frequently Asked Questions

Frequently Asked Questions

For USM Departments

 

USM International Students and Employees 

 

Q.           Does an international individual receiving a paycheck need to meet with the Tax Compliance Office? 

A.           Yes.  Before an international is hired and starts works for USM, he or she is REQUIRED to schedule an appointment with the Tax Compliance Office.

Q.           Do all international individuals need to complete Foreign National Information Form?

A.           Yes. All tax forms issued by the University (Form 1099, Form 1042-s, Form W-2, etc.) are dependent upon the international’s Tax Residency Status. This status is calculated by the University’s tax software, and the Foreign National Information Form is used to input an international into the software.

Q.           What is the difference between an SSN and an ITIN? 

A.           SSN- In order to work, the individual is required to have a SSN. In the United States, a Social Security number (SSN) is a nine-digit number issued to U.S. citizens, permanent residents, and temporary (working) residents under section 205(c)(2) of the Social Security Act, codified as 42 U.S.C. § 405(c)(2). The number is issued to an individual by the Social Security Administration, an independent agency of the United States government. Its primary purpose is to track individuals for Social Security purposes.

ITIN- The ITIN may not be used instead of a SSN for employment purposes. An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit.

Q.           Is it ok to pay an international individual with an SSN without obtaining any more information?

A.           No. Internationals are not necessarily subject to the same taxes as U.S. Citizens. As such, the current Tax Residency Status of an international must be known before any type of payment (salary, wage, scholarship income, other income, etc.) is made. 

  

General 

Q.           My department wants to pay a stipend to a student.  The student performed services for my department. Can I pay that on a Remittance Voucher?

A.           No.  All payments to students for services should be paid through payroll.

Q.           My department wants to pay a scholarship to a student for work or services provided.  The student performed services for my department.  Can I pay that on a Remittance Voucher? 

A. No.  All payments to students for services should be paid through payroll.

 

 

Sales Tax

Q.           My department wants to start selling merchandise.  Do we have to pay sales tax? 

A.           Yes.  According to the MS State Department of Revenue, when we sell tangible items (goods or products) to outside parties (including students, faculty and staff), we must collect sales tax at 7% and remit the funds collected to the MS State Department of Revenue.  For more information on your specific activity, please call the Tax Compliance Office at 601-266-4102.

Independent Contractors

See the following two links: 

  

Payments to Non-U.S. Citizens 

Q.           My department wants a foreign speaker to come speak at Southern Miss in exchange for an honorarium.  Is this person required to get a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)?  Why? 

A.           Yes.  The Social Security Administration dictates that all lawfully admitted aliens with USCIS permission to work in the U.S. are required to have an SSN.  In some instances, the individual’s visa type disallows him or her from receiving an SSN, and he or she must apply for an ITIN which is furnished by the Internal Revenue Service (IRS). Southern Miss is required to withhold federal tax on the payment of 30%. USM will furnish the individual and the IRS with a Form 1042-s of the taxes withheld. SSN or ITIN will be needed for the Form 1042-s issued by the University and it will be needed to prepare the Form 1040NR or Form 1040NR EZ tax return at the end of the year.

 

Q.           The speaker my department has been in contact with has been told by authorities in his or her country that she does not need either an SSN or ITIN.  Will she get paid for services rendered without one? 

A.           No.  As Southern Miss is required to withhold and report the payment to the IRS, Southern Miss requires the individual to supply either of those two number on the Form W-8BEN before the individual is paid.  Payment will not be made until she can supply Southern Miss with a valid number.  The individual can apply for an ITIN while still in his or her home country using an IRS Form W-7 and submit it one of three ways: 

               1)  Send it to an acceptance agent  

               2)  Mail it to the Bensalem, PA address provided on page 3 of the instructions 

               3)  Mail it to the Southern Miss International Student and Scholar Services (ISSS) office, Attn: Barbara Whitt Jackson, 118 College Drive Box No. 5151, Hattiesburg, MS  39406-5151

 

Any of the above can start processing this information and she will receive a number in approximately 30 days.  If individual so desires, he or she can wait to turn the form in to ISSS upon arrives to campus; but this will delay the payment even longer.

 

Q.           A speaker we are inviting to Southern Miss already has an SSN or ITIN.  Does he or she still need to have a tax analysis performed? 

A.           Yes.  Even though he already has a number, a tax analysis still needs to be performed to determine the Tax Residency Status and the applicable tax rate for the payment type.          

 

Q.           The department head wants me to find a way to pay our foreign visitor without an SSN or ITIN.  He says other universities do not require a taxpayer identification number.  What should I tell him? 

A.           Southern Miss complies with the IRS regulations governing payments made to foreign visitors.  Any foreign visitor receiving U.S. sourced funds are considered to be “engaged in a trade or business” and are required to file an IRS Form 1040NR, U.S. Nonresident Alien Income Tax Return, if he or she is a nonresident alien for tax purposes.  If he or she is a resident alien for tax purposes, an IRS Form 1040 will need to be filed and the SSN or ITIN is required for that form as well.  Southern Miss is required to report either the SSN or the ITIN to the IRS.

 

Q.           Can I pay a nonresident alien for independent contractor services performed outside the United States without an SSN or ITIN? 

A.           Yes.  Payments to a nonresident alien for independent contractor services performed outside the United States are not considered U.S. sourced and therefore are not subject to reporting or withholding.  The department should be sure to obtain a signed W-8BEN from the individual and all contracting and payment paperwork should specify that all work was performed outside the U.S.

 

Q.           Can I pay a nonresident alien for employment services performed outside the United States with or without an SSN or ITIN? 

A.           No. It is illegal for USM to have employment in other countries without becoming a registered employer of the country in which we are entering into for employment services. Moreover, we are required to adhere to the rules and regulations for employment in that country and or province or region, and liable for the taxes and or benefits in that country i.e. payroll taxes, health insurance, etc. 

 

Q.           Why does Southern Miss need the Foreign National Information Form completed? 

A.           This supplies the Tax Compliance Office at Southern Miss the information needed to key the individual into the tax software database and perform a tax analysis for the individual.  This analysis will Southern Miss to determine if the individual is a nonresident alien (NRA) or a resident alien (RA) for tax purposes.  In addition, the information may also indicate if the individual is exempt from federal taxes due to a tax treaty between his or her country and the U.S.

 

Q.           Southern Miss is going to contract with a foreign corporation for services.  Why does the foreign individual need to complete the Foreign National Information Form in addition to the Foreign Corporation Information Form? 

A.           The purpose of the Foreign Corporation Information Form is to determine if the payment is being made for services performed in the U.S., for services performed outside the U.S., or if payment is for goods purchased from outside the U.S.  If it is determined that the services will be performed on American soil, and therefore considered U.S. sourced, Southern Miss needs the Foreign National Information Form to help in determining the tax status of the individual who will actually be performing the work. 

It is the responsibility of Southern Miss to report all U.S. sources payments made to nonresident aliens to the IRS, and an analysis needs to be made to determine if there should be any taxes withheld on the payments that will be made to the foreign corporation. 

It is strongly suggested that you contact the Tax Compliance Office before you contract with a foreign corporation to see what information is needed, and if any taxes may be withheld.

 

Q.           What is the difference between a nonresident alien and a resident alien for tax purposes? 

A.           From information taken from the Foreign National Information Form (specifically the dates the individual is in the U.S.), Southern Miss is able to determine if the individual is a nonresident alien or a resident alien for tax purposes.  (This is not connected to the individual’s immigration status.) 

               Southern Miss is required to report all income earned by a nonresident alien to the IRS.  A resident alien may be required to report this information on his or her own income to the IRS, and in many cases, is treated like a U.S. citizen for tax purposes.

 

Q.           I have a foreign visitor who told me that he or she has a green card.  May I take her word for it? 

A.           No.  Inspecting and photocopying of his or her passport and other relevant U.S. government documents should validate information about the foreign visitor’s immigration status.  Contact ISSS for verification of visa type and employment status for all international visitors at Southern Miss.

 

Q.           The international individual my department wants to bring in should not have to pay taxes.  What is Southern Miss going to tax him on? 

A.           Unfortunately, taxes are an everyday part of life in the U.S. and everybody pays them on income earned here.  Southern Miss may be required to withhold taxes on any payments made to foreign individuals who are nonresident aliens, including scholarship portions over the amount of tuition, fees, and books, and wages or payment for services rendered.  There is always the possibility that the payment being made will be exempt from taxes due to a tax treaty.  A determination cannot be made until a tax analysis is completed.

 

Q.           What are tax treaty benefits, and how will I know if my foreign visitor will have any? 

A.           Not everyone has treaty benefits.  The U.S. has signed tax treaties with 64 countries; but not every tax treaty has the same exemption options.  Once a tax analysis has been completed using the information supplied on the Foreign National Information Form, your department will be notified if the individual you are attempting to bring in is exempt from federal taxes.  (The State of Mississippi does not recognize tax treaties; therefore, it is not possible to be exempt from state taxes.)

 

Q.            The foreign visitor I am bringing in signed the “IRS Form 8233,” exempting him from federal income taxes due to a tax treaty.  Is this exemption good indefinitely? 

A.           No.  In order to apply for exemption from federal income taxes, and “IRS Form 8233” must be completed every year the foreign visitor is at Southern Miss.  The Tax Compliance Office is responsible for sending out new forms to those visitors who have treaty benefits available.  If a foreign visitor believes he or she should be eligible, but did not receive an “IRS Form 8233” during January, have him or she should contact the Tax Compliance Office at 601-266-4084.

 

Q.           If my department is reimbursing an individual for travel expenses only, does the foreign individual need to get an SSN or ITIN? 

A.           No.  This is the only time a foreign individual does not need an SSN or ITIN.  Reimbursements of business-related travel expenses are not considered income, and therefore not reportable to the IRS.  Payment will only be made for expenses substantiated by receipts and documented in accordance with accountable plan rules.

 

Q.           I submitted a Remittance Voucher or a Requisition Request for payment to a foreign independent contractor, but he or she has not been paid yet.  What could cause a delay in the payment process? 

A.           The biggest reason for a delay in the payment to a foreign independent contractor is the lack of the “IRS Form W-9” or “IRS Form W-8BEN” giving USM the individual’s SSN or ITIN.  The independent contractor completes the W-9 or W-8BEN when he or she meets with the Tax Compliance Office to complete a tax analysis.  Purchasing and Accounts Payable cannot process payment to individuals without either an SSN or ITIN. 

If you are told the Remittance Voucher has not been processed because Accounts Payable does not have one of these two forms, contact Tax Compliance office immediately to set up an appointment for the independent contractor to complete a tax analysis.

 

Q.           My department wants to give a prize or award to a nonresident alien.  How do we do this? 

A.           Since the income is from a U.S. source, Prizes and awards specified for nonresident aliens must be reported and taxed. See the following links for awards

Q.           What is the foreign student required to do at the end of the year? 

A.           For nonresident aliens with salary/wage treaty benefit, scholarship or fellowship treaty benefit, nonqualified scholarship income, other income wages such as awards and prizes, etc. he or she will receive an “IRS Form 1042-S” showing the corresponding income, income type, and the associated taxes withheld.   

               The “IRS Form W-2” will detail any income received that is not covered by a tax treaty and the associated taxes withheld. April 15th of the following calendar year is the tax reporting deadline for all individuals required to file.

 

Q.           What is the foreign independent contractor required to do at the end of the year? 

A.           Like U.S. Citizens, the individual is required to file a tax return by April 15th of the following calendar year.  If it was determined that the individual was classified as a nonresident alien for tax purposes, he or she will receive an “IRS Form 1042-S” for any payments received from Southern Miss.  This form will have the information needed to complete the federal income tax return. If the individual was classified as a resident alien for tax purposes and received more than $600 from Southern Miss, and “IRS Form 1099” should be expected with the information needed to complete a tax return.

 

Q.           How will the foreign visitor file a tax return from his or her country? 

A.           USM will mail all applicable IRS filing forms (Form 1099, Form W-2, Form 1042-s, etc.) at the beginning of the following calendar year depending on the IRS individual reporting deadline (January 31st, and March 15th respectively).  If Southern Miss is aware that a foreign visitor is no longer in the U.S., the forms will be mailed to the foreign visitor at his home country address.  If Southern Miss is not aware that the foreign visitor has left, the forms will be mailed to his last known address in the U.S. 

               It is the foreign individual’s responsibility to contact the U.S. Embassy or consulate in his homeland and ask for an “IRS Form 1040NR, U.S. Nonresident Alien Income Tax Return”, or retrieve the form via the internet at http://www.irs.gov/formspubs in order to complete the tax return due by April 15th.

 

Q.           Who do I contact if I need more information? 

A.           If you want to know if the individual you are bringing to Southern Miss is coming in the appropriate visa status to allow payment, or if you have any questions regarding an immigration status, contact the International Student and Scholar Services office at 601-266-4841 or 118 College Drive #5151, Hattiesburg, MS  39406-5151. 

               If you have a question about the individual’s tax status, or if you believe the taxes withheld were in error, you need to contact the Tax Compliance Office at 601-266-4102 or 118 College Drive #5119, Hattiesburg, MS 39406-5143.