Research Corporation of the University of Hawaiʻi

resident alien (PRA), or
resident alien (RA); or
2. Nonresident alien (NRA)?
Other Income
Tax Treatment of Non-Service Financial Assistance for Individuals Decision Tree
Is the recipient a:
1. U.S. citizen, permanent
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Is the non-service payment for:
1. Scholarship/fellowship (for the pursuit of
studies or research); or 2. Other Income
a. Research study/clinical trial participant,
b. Prize/award, or
c. Other miscellaneous.
No changes.
The payment is considered a non-qualified scholarship/fellowship, and the payment may be subject to tax reporting and/or withholding.
• Itispreferablethatallnon-qualifiedscholarship/fellowship paymentsbemadedirectlytoarecipientontheNon- Employee Expense Payment Form.
U.S.; PRA; RA
If $600 or greater (or cumulative payments for the calendar year are $600 or greater) report on IRS Form 1099-Misc. If the $600 or greater payment was made using a third-party vendor, provide RCUH Accounting with the recipient’s IRS Form W-9andamountpaid.
NRA
Payments must generally be withheld at 30% unless an exclusion applies; a payment of any amount must be reported on an IRS Form 1042-S, regardless of whether an exclusion applies.
Wasathird-partypaymentmade?
Scholarship/Fellowship
Is the scholarship/fellowship “qualified” (i.e., is the answer “yes” to each of the following three statements)?
1. The recipient is attending a degree granting educational institution. 2. The scholarship/fellowship is for study/research at the educational
institution.
3. The scholarship/fellowship is for tuition, fees, books, supplies, or equipment
required for enrollment.
Yes
The payment is considered a “qualified” scholarship/fellowship: • Paymentsareexcludedfromtherecipient’sincome.
Yes
No
No
• •
• •
NoreportingonIRSForm1099-Miscor1042-Sisrequired. Payments
o Use a purchase order (PO) when paying the educational institution directly.
o Use the Non-Employee Expense Payment Form if the expense is being claimed as a reimbursement.
U.S.citizensandpermanentresidentaliens–Paymentsmaybeapproved online. Residentaliensandnonresidentaliens–Allpaymentsmustbesubmitted manually to RCUH Disbursing.
• No tax reporting is required. However, because the payments may be taxable:
o Programs must respond to requests from recipients regarding the amounts received (welcome letters should indicate who at the program should be contacted).
o If a third-party payment is made to a vendor on behalf of the recipient, it is recommended that programs track the amount received by each recipient.
• Certainscholarships/fellowshipsmaybeexcludedfrom income (example: General Welfare Exclusion). Programs may informrecipientsoftheapplicableexclusionthatmayapply, andsuggestthattheyconsultwiththeirowntaxadvisor.
• Allpaymentstoresidentaliensmustbesubmittedmanuallyto RCUH Disbursing.
• Forcashadvances,programsshouldwithholdtaxespriortothe disbursement.
• Third-PartyVendor oIftherecipients’taxresidencystatusesareknown,the
amount due the vendor must be grossed-up to account for
the tax owed at the time of payment to the vendor.
o If the recipients’ tax residency statuses are unknown,
payments to U.S. vendors may be approved online, but they must be processed as though they were an advance, so the paymentcanbetrackedandgrossed-upwhentheadvance is cleared.
U.S.;PRA;RA
Have the recipient complete a UH Form WH-1 todeterminewhethertherecipientisa:
1. U.S. citizen, permanent resident alien (PRA),orresidentalien(RA);or
2.Nonresidentalien(NRA).
Is the payment made to a third-party vendor (or throughathird-partyarrangementsuchasacash advance),ratherthandirectlytotherecipient?
NRA
Isthestudy/researchtakingplaceoutside the U.S. (50 states and D.C.)?
No
Yes
Thepaymentisconsideredforeignsource income to the recipient:
• Taxwithholdingisnotrequired.
• Taxreportingisnotrequired.
• Thepaymentmuststillbesubmitted
manually to RCUH Disbursing.
Yes
No
• •
•
TaxreportingonanIRSForm1042-Sisrequired(foranyamount,andevenifthe amount is excluded).
Taxwithholdingat30%isrequiredunless:
o The recipient attends a degree granting educational institution on an F, J, M or Q visa – then the rate is 14%. If the recipient will also be in the U.S. for 365 days or less, an additional reduction on withholding may be available.
o There is an applicable tax treaty that reduces or eliminates the withholding.
o The funding source is a USAID grant – then the rate is 0%. Evenifanexclusion(suchastheGeneralWelfareExclusion)mayapply,becauseits application depends on each individual recipient’s facts and circumstances, RCUH cannot make the determination, and will withhold/report as required.
No changes.
This decision tree provides a summary of the tax reporting and withholding requirements for non-service financial assistance provided to individuals. RCUH Policy 2.006 Tax Treatment of Non-Service Financial Assistance for Individuals, provides more detailed guidance and, therefore, must be read in conjunction with this decision tree. All scholarship/fellowship payments made to or on behalf of UH students (including UH postdoctoral fellows) are required to be processed through UH.
The payment is considered U.S. source income to the recipient:
• AllpaymentstononresidentaliensmustbesubmittedmanuallytoRCUHDisbursing.