Tax Reporting & Withholding: Does Not Want to Claim Treaty Benefit
Non-resident Alien: No Tax Treaty Benefit
Payments made to nonresident aliens are generally subject to federal income tax withholding at a rate of 30% (see exceptions, below) and are reported on a Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, annually. For purposes of this section, payments include:
- Payment for Independent Personal Services
- Fellowship or Scholarship
- Prize or Award
- Expense Reimbursements
Exception 1: Substantiated expense reimbursements paid pursuant to University policy are not subject to withholding or reporting.
Exception 2: Fellowships/Scholarships paid to an individual in F-1 or J-1 status are subject to a reduced withholding rate of 14%. These payments are reported on a Form 1042-S.
CT Athlete and Entertainer Withholding Tax
The Connecticut athlete and entertainer withholding tax (“A&E” tax) generally must be withheld by the University at the rate of 6.7% on payments of more than $1,000 for a performance (or series of performances):
- For services performed in Connecticut;
- By an athlete or entertainer (hereinafter “performer” or “performing entity”);
- Who is not a Connecticut resident; and
- Who is not considered an employee of the University for federal tax purposes.
The State of Connecticut considers a wide variety of personal service providers to be performers who are subject to the A&E tax including, for example, public speakers and lecturers, referees, writers, directors, bands and actors.
See Policy 3410 for an in depth discussion of the A&E tax, including an extensive list of performers and performing entities subject to the A&E tax. See Procedure 3410 PR.1 for guidance with respect to obtaining exemption or reduced rate of withholding from the A&E tax.