Honorarium Payments To J-1 Exchange Visitors
Under the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA), higher education institutions and non-profit or governmental research entities may make honorarium payments to foreign national visitors only in B-1/VWB or B-2/VWT immigration status for "usual academic activities." Although the ACWIA does not apply to J-1 Exchange Visitors, certain J-1 Exchange Visitors may provide and be compensated for services by organizations other than their sponsor or designee within the guidelines of their Exchange Visitor Program (EVP).
J-1 Exchange Visitors
The Exchange Visitor’s Form DS-2019, Certificate of Eligibility for Exchange Visitor (J-1) Status, issued by the EVP sponsor describes the EVP guidelines of J-1 Exchange Visitors. Exchange Visitors may receive compensation from their sponsor, or their sponsor's designee, for employment when the activities are part of the EVP. J-1 Exchange Visitors may engage in activities at other organizations if those activities are anticipated by their EVP. (One group of J-1 Exchange Visitors, those in the Summer/Work Travel Program, may work for any organization as long as they meet the conditions of their EVP.) Immigration rules deem Exchange Visitors who engage in unauthorized activities to be in violation of their program status with the result that their participation in their EVP is subject to termination.
It is the responsibility of the Responsible Officer (RO) of the EVP to advise Exchange Visitor participants of:
The immigration rules specifically provide opportunities for J-1 Professors and Research Scholars to participate in, and to receive payment for, certain activities for other organizations as long as the conditions for this exception are met. (See 22 CFR 62.20(g)).
Professors and Researchers
J-1 Professors and Research Scholars may participate in occasional lectures and short-term consultations for other organizations, unless these activities are disallowed by their program sponsor.
The lectures and consultations must satisfy three conditions:
In order to obtain authorization for such activities, a Professor or Research Scholar must present to his or her RO:
The RO must then review the letters and make a written determination of whether such activity is warranted and satisfies the above mentioned criteria. The authorization, if granted, must be given in advance of the Exchange Visitor engaging in the proposed activity.
Immigration rules specify that any payments received by a Professor or Research Scholar for these activities must be as an independent contractor. The payments that Professors and Research Scholars receive for such activities are typically referred to as "honorarium payments" even though they are not covered by the B honorarium rules.
Income Taxation of Honorarium Payments
U.S. tax rules consider payments for activities not under the supervision and control of an organization receiving the services to be self-employment income. Therefore, honorarium payments to Professors and Research Scholars are taxed as self-employment income.
Honorarium payments made to nonresident aliens for tax purposes are subject to 30 percent withholding (unless an exception applies). Honorarium payments to resident aliens for tax purposes are subject to backup withholding at 28 percent if the recipient fails to provide a U.S. Social Security number (SSN) or individual taxpayer identification number (ITIN). Honorarium payments are reported on Form 1042-S for nonresident aliens and Form 1099-MISC for resident aliens.
All income tax treaties allow an exemption from tax for self-employment income as long as treaty conditions are met. For exemption from withholding, the recipient must submit a valid Form 8233 to the payer prior to payment.
Most Professors and Research Scholars will not qualify for treaty benefits for the self-employment benefit for one or more reasons:
Nonresident aliens with self-employment income (including such income exempt from tax under a treaty) must submit a Form 1040NR tax return. Resident aliens must submit a Form 1040 but only if their worldwide income from all sources exceeds the applicable threshold.
Paula Singer, Esq. chairman of Windstar Technologies, Inc. and partner in the tax law firm, Vacovec, Mayotte & Singer, Newton, MA, has over 25 years of experience providing advice and compliance services to employers on cross-border employment matters. For more information, visit www.windstar.com. For additional information, call 1-800-259-6398 or email: firstname.lastname@example.org.
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