A payment to an international visitor for a scholarship is administered by the Student Finincial Aid Office (FAO). The Director of the FAO determines if scholarships are awarded to students who are either foreign nationals or students holding a visa status that requires federal tax withholding. Upon a determination that a student requiring withholding has been awarded such a scholarship the director will work with both the awarding department, and the Accounting Office to make arrangements for the withholding resulting in the students receiving the net proceeds of the scholarship.
If a nonresident alien is awarded a scholarship, the student completes the Foreign National Information Form. This information is necessary for the Office of Accounting, which is responsible for assessing tax implications and processing payments. A completed IRS W-8BEN Form should accompany the Foreign National Information Form.
If the international visitor is considered a “nonresident alien” (NRA) for tax purposes, IRS withholding at a rate of 14% is required There are some allowable exclusions on scholarship awards which are tuition, fees, books, and supplies that are required by the course of instruction. Only the scholarship amount in excess of these allowable exclusions is subject to a 14% withholding rate. The only exception is if payments are specifically exempted by a tax treaty between the United States and the country of official residence of the NRA. The IRS requires that payments to the NRA , and any related withholding, be reported annually to the NRA and the IRS on IRS Form 1042S.
No withholding is required if the international visitor is considered a “Resident Alien” for tax purposes. An IRS W-9 Form should be completed and attached to the voucher.