1042-S Withholding

1042 Withholding

Just as the University is required to do for all U.S. citizens and resident aliens, we are required to withhold taxes on the U.S. Source income of a nonresident alien individual. Tax treaties may reduce or eliminate tax withholding. See the income tax treaty section below to see if a foreign individual may qualify for this type of benefit. If the individual does not qualify, standard tax withholding is as follows –

Wages/Employment Compensation

Employment compensation is taxed at graduated rates. There are special withholding rules for employees from Canada, Korea, Mexico, the North Marianna Islands, American Samoa, and students from India.

Non-Service Scholarships/Fellowships/Stipends

Non-service scholarship, fellowship, or stipend payments are made to assist someone in pursuing a course of study or research. These payments made to foreign visitors may include a combination of the following:

• Tuition, required fees, books, and course-related materials;
• Stipend for living expenses, including meals, lodging, travel, and other personal items;
• Medical insurance premiums paid to insurance companies; and airfare purchases from airline companies or travel service providers.
• Amounts paid to individuals as qualified scholarships or fellowships can only be excluded from taxable income if the following requirement is met:
  • The non-service scholarship or fellowship is designated to pay for (i) tuition and fees required for enrollment or attendance at CU, or (ii) other required fees, books, supplies and equipment required by all students in a particular course of study. 

All other scholarships, fellowships or stipends that do not meet the above criteria are taxable to the recipient. Post-doctoral fellowship awards are made to individuals to further their pursuit of a course of study or research beyond the doctoral level; therefore, the entire post-doctoral fellowship award must be included in taxable income.

Standard tax withholding rates for a non-service scholarship or fellowship are:

• F, J, M and Q immigration status – 14% tax rate; or
• Other non-immigrant statuses – 30% tax rate.

Honoraria

Payments for Services Delivered in the United States, Royalties, Awards, Prizes, and other payments.

• 30% tax rate

Entities (Corporations)

The University is required to withhold tax on the U.S. Source income of a foreign entity. Income tax treaties may reduce or eliminate tax withholding. See the income tax treaty section to determine if a foreign entity may qualify for this type of exemption. If the entity does not qualify for a tax treaty exemption, the tax must be withheld at a 30% tax rate.
 
For more information on Withholding of Tax on Nonresident Aliens and Foreign Entities: https://www.irs.gov/pub/irs-pdf/p515.pdf.

Still have questions?

If you still have questions regarding your 1042 you can submit a question via the completion of this ServiceNow Form or by calling the HR Service Center at 212-851-2888.