University of Wisconsin-Madison

Procedure: 601-Tax Reporting and Withholding on Non-Salary Payments

Appendix 2 - Important Tax Information

For persons who receive payments from the University of Wisconsin for Services, Rents, Royalties, Prizes or Awards, Scholarships and Fellowships

Federal and State laws require the University of Wisconsin System to report many taxable payments to the IRS, Wisconsin Department of Revenue, and the individual receiving the payment. In some cases, the University is also required to withhold federal or state income taxes from payments. Please read the following carefully, and be sure to provide complete and accurate information to the department authorizing your payment. This will help to ensure your payment receives the correct tax treatment.

Travel Expenses

If you provide a service to the University and the department agrees to reimburse you for travel expenses, there are two ways this can be handled. If you do not provide a complete accounting of expenses to the department (including original receipts), your reimbursement will be considered as part of the compensation for the service. The reimbursement could be reportable to tax authorities and subject to withholding. You may be able to deduct the expenses on your annual tax return. If, however, you provide a complete accounting to the department, the reimbursement will not be reported to tax authorities and will not be subject to withholding.

Payments to Your Company

If you are performing services as a representative of a company rather than as an individual, the check must be made payable to the company, unless you are a sole proprietor, in which case the check must be made payable to you and you must provide your social security number. If the company is a partnership, you must provide the company name and Federal Employer Identification Number (FEIN). If the company is a U.S. corporation, it is not necessary to provide the company's FEIN, but make sure the department is aware of the company's corporate status. Do not provide Canadian Social Insurance Numbers.

State Tax Withholding

The State of Wisconsin requires 6% tax withholding on payments to entertainers and public speakers who are not Wisconsin residents and who earn $3200 or more in entertainment or public speaking income from a UW campus during a calendar year. Withholding is not required if you file a surety bond or a deposit with the Wisconsin Department of Revenue for at least 6% of the contract price, using Form WT-11. The Wisconsin Department of Revenue will review the application and, if it has been properly submitted, issue you two copies of the receipt signed by a Department representative. The white copy of the receipt should be given to the employer as proof that you have filed a surety bond or cash deposit. The pink copy of the receipt should be retained by the nonresident entertainer to be attached to the Wisconsin tax return

Federal Tax Withholding

The rules regarding federal tax withholding on payments to individuals are varied and complex. The matrix that follows summarizes withholding rules for persons receiving various types of payments. Use this matrix to determine if your payment may be subject to withholding. You will notice on this matrix that different tax rules apply if you are a resident of a country which has a tax treaty with the United States. The following is a list, through May, 1998, of all countries with U.S. tax treaties.

Treaties are not yet in force with Estonia, Latvia and Lithuania. The treaties with the countries followed by a * in the above list do not cover scholarship or fellowship payments, unless the source of funds is outside the U.S. Scholarship or fellowship recipients from Canada or Mexico may be able to claim additional personal exemptions. In some cases, payment may be exempt or subject to a reduced withholding rate if you file for an exemption on IRS Form 1001 or 8233. These forms are available from University departments. Many treaties provide partial exemption for performing artists, athletes, or for persons in the U.S. to teach or perform research. It is your responsibility to determine your own personal tax situation and file whichever form is necessary for you to receive an exemption from withholding. For help in making this determination, contact the IRS at 1-800-TAX-1040 or consult your tax adviser. The U.W. does not provide individual tax advice.

FEDERAL AND STATE WITHHOLDING ON PAYMENTS TO INDIVIDUALS

This is a summary (through May, 1998) and not full documentation of the applicable tax laws. It is the recipient's responsibility to determine his/her own tax situation.

Form WT-11 is only required to prevent state tax withholding if accumulated income from the campus for entertainment or public speaking services exceeds $3200 in the calendar year. Form WT-11 is a State of Wisconsin form which states that a surety bond has been filed with the Wisconsin Department of Revenue for any state taxes which may be due.

Form 1001 is a federal form which is a certification that income is exempt or entitled to a reduced withholding rate due to the existence of a tax treaty. Applies to rents, royalties, scholarships and fellowships. SS# or ITIN is required.

Form 8233 is a federal form which is a certification that income is exempt or entitled to a reduced withholding rate due to the existence of a tax treaty. Applies to services and teaching/research. Must use form Rev. Oct, 1996. Visa type required. Beginning 1/1/97, SS# or ITIN required. Teaching/research payments also need Revenue Proc form.

Form W-7 is a federal form which is used to apply for an IRS Individual Tax Identification Number (ITIN). An ITIN is a substitute for a Social Security number for certain nonresident aliens who are not eligible to receive a SS#. An ITIN or SS# will be required for everyone receiving payment or filing a US tax return beginning 1/1/97.

Form W-8 Certificate of Foreign Status form must be completed by all non-resident aliens receiving payments for services.

Procedure: 601-Tax Reporting and Withholding on Non-Salary Payments

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