The IRS requires 14% tax withholding on the portion of scholarships that exceeds qualified expenses (non-qualified scholarships) paid to an international visitor within an caldendar year, unless scholarship/fellowship treaty benefits are available and formally claimed.

Internationals Students and Scholars sponsored by and receiving scholarships/fellowships from the University of Oregon:

• Who do not have a U.S. Social Security Number or Taxpayer Identification Number (TIN), are eligible to schedule a Virtual Zoom session for assistance in filing an IRS W-7 Application for TIN.

• 1042-s Tax form is used to report gross amount of tax reportable payments and related taxes witheld or treaty benefits.

• Copies of non-payroll related 1042s forms issued in prior years can be requested by sending an email to Joy Germack jgermack@uoregon.edu.  Provide your name, UO ID number, and the 1042-s year requested. The requester's email address must be on file in Duckweb.   

• Copies of Payroll-related 1042-s forms issued in prior years can be requested at Employment related 1042-s forms.

Tax Returns

• 1040NR federal tax return
• Oregon 40N state of Oregon tax return
• 8843  Required for F and J visas. Statement for Exempt Individuals
•   More Information about tax filing can be found at https://isss.uoregon.edu/node/340 

Payments to international Students and Scholars Not sponsored by the University of Oregon are subject to a different process.

When does a Non-Resident become a "Resident for tax purposes" under the IRS Substantial Presence Test. 

 

In 1986 the Tax Reform Act substantially overhauled the Internal Revenue Code (IRC) and included a significant change to IRC §117 special tax benefit for students, a provision that governs the taxation of scholarship/fellowship grants, so that only tuition and directly related expenses were eligible for a tax exclusion. Shortly after, IRS ruled in notice 87-31 that a grant-making institution was not required either to withhold tax or to report to the IRS any scholarship/fellowship payments, taxable or not to the student, that were made to U.S. citizens and permanent resident aliens. However, the ruling did not apply to institutions that made payments to international (non-resident aliens) students. So, payments of scholarships or fellowships made to international students are subject to U.S. tax reporting and withholding, unless there are treaty benefits available and formally claimed.

Payments of scholarships, fellowships, and grants paid to students who are U.S. citizens, resident aliens, and non-resident aliens who have met the substantial presence test (RAfTP) are not reportable by the University to the IRS and are not subject to tax withholding.  However, these students will need to make the determination themselves whether the scholarships should be reported on their personal tax returns.  See IRS Publication 970  https://www.irs.gov/pub/irs-pdf/p970.pdf  and IRS Publication 515  https://www.irs.gov/pub/irs-pdf/p515.pdf

 

 

W-8BEN form is used to set up UO students and scholars for non-payroll payments. Within legal guidelines, it can be used to claim treaty benefits for royalty/passive income or scholarships/fellowships reducing tax withholding to 0%. The W-8BEN cannot be used to claim treaty benefits for independent or dependent personal services.

• A Permanent residence address is required on line 3.
• A U.S. Tax identification number (TIN) is not required unless treaty benefits are requested.
• A Foreign Tax Identification number (FTIN), issued by their country of residence, is required on line 6a unless the box in 6b is checked.
• A date of birth is required on line 8.
• Part II Treaty Benefits are only available for royalty or scholarships/fellowships benefits and do require a U.S. TIN or SSN is required to claim treaty benefits.
• Part II, lines 9 and 10 are not required unless treaty benefits are requested.
• The box above the signature line must be checked.
• Not all countries have a tax treaty with the U.S., and not all tax treaties contain a tax exemption for student scholarships/fellowships. See countries that do have student treaty articles
• No one can take treaty benefits away from a foreign national, but the University of Oregon is only allowed to grant them up front if they are correctly and formally requested.  Any and all taxes withheld are paid to the IRS in the their name. And they can use the information found on the form1042-s mailed to them after the calendar year closes to file a U.S. tax return to obtain their treaty benefits, and a full tax refund, from the IRS. 

Form 1042-s:  used to report income described under Amounts Subject to Reporting on Form 1042-S , later, and to report treaty benefits or amount of tax withheld. 

Scholarships/Fellowships: cannot require any past, present, or future services.

Scholarship/Fellowship Source: For scholarship/fellowship payments the "residence of the payer" determines the source of payment. If the payment is from an U.S. entity it would be considered to be U.S. source and subject to U.S. tax regulations including tax reporting and tax withholding unless scholarship/fellowship treaty benefits are available and formally claimed.  If the payment is from an entity outside the U.S. it would go directly into the student’s account and would be "foreign source", and if paid to an international student, would not be subject to U.S. taxation.

Qualified Scholarship/Fellowship stipend awards: A payment used for tuition, mandatory fees, books, or education costs that are required of all students in a course of instruction is excludable from taxable income under IRS code 117. Qualified Tuition and Related Education expenses (QTRE)

Non-Qualified Scholarship/Fellowship stipend awards: a payments not dedicated to QTRE that can be used to cover living expenses. Some examples are room, board, health insurance, or travel that benefits the student’s education.  Any stipends paid outside fo the Student A/R module and made directly to the international student are considered non-qualified stipends.

Substantial Presence Test (SPT): IRS test for special status of an international visitor for tax purposes only. Once an international visitor is inside the U.S. for a specifically counted number of days over the course of three years, they may become a “Resident Alien for Tax Purposes” (RAfTP).  However, individuals who are entered the U.S. with an F-1 or J-1 visa are exempt from counting days for up to 5 years. The University of Oregon uses a UONRA form to determine if the international student meets the SPT.  If the SPT is met, then the RAfTP is treated the same as a U.S. person for tax purposes.  https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

Tax Withholding:  Any and all amounts of taxes withheld from a payment will be paid to the IRS in the name of the recipient of the payment.  After the end of the current calendar year, before March 15^th of the following calendar year, the recipient will receive a 1042-s form from the University of Oregon showing the payment and withholding amounts. The recipient may use the information on the 1042-s form to fill out a U.S. tax return and request a possible refund from the IRS.

Qualified Expenses:  Scholarships/fellowships stipends are not taxable to the extent they do not exceed the cost of tuition and course-required expenses such as fees, books, supplies, equipment required for classes. These non-taxable amounts are called qualified education awards.

Non-Qualified Expenses: Amounts in excess of qualified education expenses are taxable to the student unless scholarship/fellowship treaty benefits are available and formally claimed.  The IRS defines non-qualified education expenses to include student activity fees, athletic fees, insurance expenses, certain travel, room and board, health insurance, living allowance stipends, or other expenses not directly related to an individual’s academic course of instruction.

Treaty Benefits:  The U.S. does not have a tax treaty with every country in the world. There are only 41 countries that have a scholarship/fellowship treaty benefit article. If there is a scholarship/fellowship article, this type of treaty benefit can only be claimed if the international visitor has a U.S. taxpayer ID number or a Social Security Number, using either an IRS W-8BEN or an 8233 form.  Here is a list of countries that have a tax treaty scholarship/fellowship article https://apps.irs.gov/app/vita/content/globalmedia/treaty_benefits_incomecode15.pdf .

 

The University of Oregon international students or scholars who are receiving scholarship or fellowship stipends may be required to file a U.S. and Oregon tax return which requires having an ITIN (unless they have or will soon have an SSN) for U.S. Income tax filing purposes. The Form W-7 is the application for an ITIN that must be filled out correctly and mailed to the Internal Revenue Service IRS by the Global Engagment ISSS.  The ITIN application is not available to students who are not receiving scholarship or fellowship awards from the University of Oregon.

The first step is to email Joy Germack in Tax Services at jgermack@uoregon.edu requesting a Virtual meeting to fix out the Forms W-7 and W-8BEN (if required).  You will need to provide several dates and times you are available between Monday and Friday 7:30 AM to 2:30 PM Pacific time. A Virtual W-7 meeting in either ZOOM or TEAMS will be set up. The W-7 meeting should only last about ½ hour.  You are required to have on hand your *passport, *your visa, *your I-20 (or DS-2019),  a copy of your University of Oregon Scholarship Award Letter, and both your Current U.S mailing address and your Permanent be active in your DuckWeb UO records.  Otherwise, the meeting will have to be rescheduled. 

The second step will be to make an appointment with International Student & Scholar Services for W-7 processing and mailing the required, authenticated documents to the IRS for you.   

About 8-12 weeks after your application has been mailed (either by ISSS or the local IRS office) you will receive an IRS letter to the mailing address on your W-7 f orm. If you move, the IRS letter will not be forwarded to your new address.  Once you have received the IRS letter, contact Joy Germack in Tax Services at jgermack@uoregon.edu for a Secure One Drive link to provide the University of Oregon records with your new ITIN.

The University of Oregon is only able to assist current UO students and scholars with the Form W-7 application process.

Department instructions: Student Accounts Receivable (A/R) Payments:

The net amount of any U.S. source scholarship/fellowship payments that exceed the amount of qualified expenses, within a calendar year, are subject to 14% tax withholding, unless scholarship treaty benefits are available and formally claimed. Qualified expenses do not include room, board, insurance, or taxes.

Department instructions: Accounts Payable (A/P) Payments:

1. Determine if the student might be eligible for tax treaty benefits. Look to see if their country of residence for tax purposes on the list of countries that have negotiated scholarship/fellowship tax treaty benefits with the United States.  https://apps.irs.gov/app/vita/content/globalmedia/treaty_benefits_incomecode15.pdf .
2. Ask the student has a U.S. Taxpayer ID number (ITIN), issued by the IRS, or a Social Security Number (SSN).
3. If they do not have a U.S. Taxpayer ID number (SSN or ITIN), they may leave line 5 blank.
4. Have the student complete a UO-NRA form . This will be submitted to Business Affairs (jgermack@uoregon.edu) and analyzed to determine whether they have passed the Substantial Presence Test (SPT).
5. Have the student fill out and sign a W8-BEN form, even if they meet the SPT. Note: Line 3 is for their permanent address outside the U.S., and Line 4 is for their current U.S. address. Their Date of Birth is required.
6. If they are from a treaty country (step 1) ‘And’ they have an ITIN or SSN (step 2); they are eligible for Treaty Benefits.
7. If they are not eligible for Treaty Benefits, they do not need to fill out Part II Claim of Tax Treaty Benefits. Go to Step 9.
8. If they are eligible for treaty benefits, they will need to complete Part II of the W-8BEN form to formally claim treaty benefits.  Part II should include the name of their country of residence, the treaty article found at https://apps.irs.gov/app/vita/content/globalmedia/treaty_benefits_incomecode15.pdf  , 0%, Scholarship/Fellowship, and a statement, if it is true, that they have no permanent residence inside the U.S.
9. Using the forms, follow Accounts Payable Vendor Set Up Procedures found at https://ba.uoregon.edu/content/vendor-setup

Version 01/05/2024

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