Procedure: 601-Tax Compliance, 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.

W-9 (Request for Taxpayer Identification Number) Requirement for all Tax Reportable Payments.


If you are receiving a payment for Services, Rents, Royalties, Prizes or Awards, or any other tax reportable payment then you must provide the paying department a completed and signed W-9 form prior to the payment being made.  If you do not provide the completed and signed W-9 then the UW is required by IRS regulations to withhold 28% Backup Withholding on your payment(s).  If you submit a W-9 but do not provide the required information the UW will withhold the 28% Backup Withholding as required by the IRS.  The UW-Madison also requires the W-9 to be signed.  If the W-9 is not signed the UW will also withhold 28% Backup Withholding per IRS regulations.

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 $7,000 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

The UW is not required to withhold federal or state tax on 1099-MISC reportable payments as the IRS considers these payments to be made to Independent Contractors thus the recipients are responsible for submitting and report tax on these payments.

Federal Tax Withholding


The UW is not required to withhold federal or state tax on 1099-MISC (U.S. Residents) reportable payments as the IRS considers these payments to be made to Independent Contractors thus the recipients are responsible for submitting and report tax on these payments.

The UW is required to withhold federal tax on 1042-S (Nonresident Alien) reportable payments as the IRS considers these payments to be made to Independent Contractors thus the recipients are responsible for submitting and report tax on these payments.

Payments to Nonresident Aliens (NRA) rules regarding federal tax withholding on payments to individuals are varied and complex.  Unless a tax treaty applies between the U.S. and the recipient’s country for tax purposes, the UW is required to withhold 14% federal tax on all scholarships/fellowship paid to an NRA and 30% for all other non-scholarship/fellowship payments made to an NRA.  Current applicable tax treaties can be found at IRS web page at www.irs.gov under Publication 515.  In referencing Publication 515 tax treaties only income code for (1) Scholarship and Fellowship Grants, (2) Independent Personal Services, and (3) Public Entertainment are paid through Accounting Services via check.  All other income codes are Payroll related and apply only to employees on Payroll which means the payment is not made via check but is made via the UW Human Resources System (HRS).  If you received a payment through Payroll please contact your paying department payroll area for information on these payments.  Payroll payments are reported through a W-2 and or a 1042-S issued by Payroll and they are posted on the employee’s MY UW Portal web page.

If a tax treaty is applicable to your particular payment a form W-8BEN needs to be completed and signed prior to the payment being made, or a form 8233 needs to be completed and signed prior to the payment being made for all non-scholarship/fellowship payments.  Please contact your paying department if you think you are eligible for a tax treaty as they are responsible for obtaining the required forms and assisting you with these forms.

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 forms are 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.  Due to legal implications, the U.W. does not provide individual tax advice.

FEDERAL AND STATE WITHHOLDING ON PAYMENTS TO INDIVIDUALS

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

WISCONSIN RESIDENT

U.S. RESIDENT—NOT WISCONSIN

NONRESIDENT ALIEN (NRA):  LEGAL RESIDENT OF TREATY COUNTRY

NONRESIDENT ALIEN (NRA):  LEGAL RESIDENT OF NON-TREATY COUNTRY

Services including Public Entertainment and Research Subject Payments

Will withhold federal taxes unless a completed and signed W-9 is provided prior to payment.  For public speaking or entertainment, will withhold state taxes unless WT-11 or waiver provided OR payments are Total Contract Price is less than $7,000 in a calendar year, including travel expense reimbursements.

Will withhold federal taxes unless a completed and signed W-9 is provided prior to payment.  For public speaking or entertainment, will withhold state taxes unless WT-11 or waiver provided OR payments are Total Contract Price is less than $7,000 in a calendar year, including travel expense reimbursements.

If services performed in U.S., will withhold federal taxes of 14% on Scholarships and Fellowships and 30% on non-scholarship and fellowship payment unless a current W-8BEN is one file for  Scholarships and Fellowships and a current 8233 forms is on file for non-scholarships and fellowships and exemptions meet the terms of the treaty.  For Public Entertainment, will withhold state taxes unless Form WT-11 or waiver provided OR payments are less than $7,000 in a calendar year, including travel reimbursements. A completed and signed W-8BEN which includes a valid U.S. Taxpayer Identification Number is required.

If services performed in U.S., will withhold federal taxes of 14% on Scholarships and Fellowships and 30% on non-scholarship and fellowship payments.  For Public Entertainment, will withhold state taxes unless Form WT-11 or waiver provided OR payments are less than $7,000 in a calendar year, including travel reimbursements. A completed and signed W-8BEN which includes a valid U.S. Taxpayer Identification Number is required.

TRAVEL EXPENSE REIMBURSEMENTS

Department’s choice.  May be (1) included in services payment or (2) may gather receipts and pay as business expenses.  Tax reportable only under option 1 above.

Department’s choice.  May be (1) included in services payment or (2) may gather receipts and pay as business expenses.  Tax reportable only under option 1 above.

Department’s choice.  May be (1) included in services payment or (2) may gather receipts and pay as business expenses.  Tax reportable only under option 1 above.

I Department’s choice.  May be (1) included in services payment or (2) may gather receipts and pay as business expenses.  Tax reportable only under option 1 above.

PRIZES OR AWARDS

Will withhold federal taxes unless a completed and signed W-9 is provided prior to payment.

Will withhold federal taxes unless a completed and signed W-9 is provided prior to payment.

Will withhold 30% federal tax. No exemptions; DO NOT USE Form 8233.  No treaties exist for Prizes and Awards.

Will withhold 30% federal tax. No exemptions; DO NOT USE Form 8233.  No treaties exist for Prizes and Awards.

RENT OR ROYALTIES
.

Will withhold federal taxes unless a completed and signed W-9 is provided prior to payment.

Will withhold federal taxes unless a completed and signed W-9 is provided prior to payment.

If property is in U.S., or royalties from U.S. sales, will withhold unless Form W-8BEN is completed, signed, and provided.

If property is in U.S., or royalties from U.S. sales, will withhold.

SCHOLARSHIPS AND FELLOWSHIPS

No withholding; no reporting to individual by UW.

No withholding; no reporting to individual by UW.

If source of funds is in U.S., will withhold federal taxes unless form W-8BEN is filed and exemptions meet terms of the tax treaty between the U.S. and the recipient’s country for tax purposes.

If source of funds is in U.S., will withhold federal taxes are withheld.  


Form WT-11 is only required to prevent state tax withholding if accumulated income from the campus for entertainment or public speaking services exceeds $7,000 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 and also used to remit the 6% withholding to the Wisconsin Department of Revenue.

Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) 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 only to to rents, royalties, scholarships, and fellowships.  U.S. Taxpayer Identification Number is required.  Form W-8BEN  must be completed by all non-resident aliens receiving payments for services.

Form 8233 (Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual) 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.  

Form W-7 (Application for IRS Individual Taxpayer Identification Number) 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 (SSN) for certain nonresident aliens who are not eligible to receive an SSN because they do no have an employment situation in the U.S.  An SSN or ITIN is required for everyone receiving payment or filing a US tax return beginning 1/1/97.

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