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

Federal and State Tax Reporting

1099 Reporting--Payments to U.S. Residents

The following chart lists the types of payments to U.S. resident individuals(including resident aliens), sole proprietorships, limited liability companies, and partnerships which are reported on form 1099-MISC to the taxpayer, the Wisconsin Department of Revenue, and the Internal Revenue Service. Total payments to a taxpayer are summed by category (services, prizes and awards, rent, and royalties) at the end of each calendar year. If payments in any category reach the UW reporting level shown below, a 1099-MISC is produced and payments are reported to tax authorities. Each year Accounting Services prepares and mails all 1099-MISC forms no later than January 31st as required by the Internal Revenue Service (IRS) regulations.

Reporting Requirements

Type of Payment Federal Law State Law UW Reporting Level
Services $600 $600 $600
Business Purpose Documented Travel not included in the services payment Not reportable
Research Subjects $600 $600 $600
Prizes and Awards $600 $600 $600
Rentals $600 $600 $600
Royalties $ 10 $100 $ 10
Scholarships/Fellowships Payments are tax reportable to recipient, but none are reportable on form 1099-MISC.

An IRS forms W-9 is required when making tax reportable payments as the UW is required to obtain the following information on all potentially reportable payments: legal name, permanent mailing address, U.S. Taxpayer Identification Number (Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), Federal Employer Identification Number (FEIN or EIN).  Sufficient description about the payment is necessary so the correct classification may be determined.  This information is required for all payments on reportable categories (services, prizes and awards, rent, royalties) listed above, regardless of amount. If no U. S. Taxpayer Identification Number is provided, payments may be subject to withholding (see withholding section of this manual).  Non-reportable payments (scholarships/fellowships and student loans to UW students) require a U. S. Taxpayer Identification Number for financial aid reporting purposes.  If the student does not have a U. S. Taxpayer Identification Number, student ID# is required.  Mailing address is not required on these payments.

1042-S Reporting--Payments to Nonresident Aliens (NRA)

An IRS forms W-8BEN is required when making tax reportable payments as the UW is required to obtain the following information on all potentially reportable payments: legal name, permanent mailing address, U.S. Taxpayer Identification Number (Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), Federal Employer Identification Number (FEIN or EIN).  All payments to nonresident aliens, regardless of amount, which represent compensation for services, rent, royalties, prizes and awards, training stipends, scholarships, and fellowships are reported to the individual and the Internal Revenue Service (IRS) on Form 1042-S.  These payments must be processed on the Payment to Individual Report (PIR).  All payments must include certain required documentation and are subject to immigration and visa restrictions as outlined in (http://www.bussvc.wisc.edu/howto/acct/requiredtx.html).  All payments reportable on Form 1042-S require a permanent mailing address and country of residence on the Payment to Individual Report (PIR).  If the individual is claiming exemption or a special withholding rate for non-scholarship/fellowship payments, IRS Form 8233 must be completed, signed, and attached (see withholding section in this manual).  The 1042-S forms will be prepared and mailed by Accounting Services no later than March 15 of each year.

A Nonresident Alien (NRA) is an individual whose residence is not within the United States and who is not a U.S. citizen.  A Resident Alien is an individual who is a lawful permanent resident of the United States at any time during the calendar year.  This is known as the "green card" test. Alternatively, an alien is considered a U.S. resident if the individual meets the "substantial presence" test for the calendar year.  Under this test, the individual must be physically present in the United States or present at least:

  1. 31 days during the current calendar year, AND
  2. 183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year but only 1/3 the number of days of presence in the first preceding year and only 1/6 the number of days in the second preceding year.

However, individuals present in the U.S. under a J or Q non-student visa are considered "exempt individuals" until they have been present for two calendar years out of the last six years. Therefore, they do not begin to count days of presence toward the presence test until they are no longer "exempt individuals". Students present in the U.S. under F, J, M or Q student visas are considered "exempt individuals" until they have been in the U.S. for any part of five calendar years.
For more information on resident and nonresident status, the tests for residence, and the exceptions to them see the IRS Publication 519, U.S. Tax Guide for Aliens. You may call the Internal Revenue Service at 1-800-829-3676 (1-800-TAX-FORM) for a copy or visit the IRS page.

All categories of J-1 exchange visitors are eligible for social security numbers and should apply at a Social Security Administration office or at a U.S. Embassy or Consulate.  F-1 and J-1 students who are not employed are not eligible for social security numbers, and should apply for an ITIN by filing IRS Form W-7 at a local IRS office or at through the UW Tax Compliance Office.  Contact a Dean’s office or Accounting Services for more information.  After application has been made for either a social security number or ITIN, but the number has not yet been received, enter "applied for" and the date of application on the PIR.  When the individual receives the number from Social Security Administration or IRS, (s)he must provide the number to their paying department and the Accounting Services Tax Compliance Office.

For more information on Visa requirements and the tax issues to consider when paying non-resident aliens, see UW-Madison Handbook "Payments to Foreign Nationals".

W-2 Reporting--Non-Overnight Meals, Moving Expenses, Educational Assistance

The expenses/reimbursements listed below are reported by Accounting Services to the Human Resources System (HRS) and appropriate federal, state, and FICA taxes will be withheld.  These payments will also be included in gross income on employees' W-2 forms.

Meals

In general, employee reimbursements for meals are not taxable and not reportable to the IRS. The only exception is for meals not associated with an overnight stay and not related to recruiting of students or job applicants. 

Moving Expenses

Effective January 1, 2018 through December 31, 2025:

  • The new law (Tax Reform) suspends the exclusion from gross income and wages for qualified moving expense reimbursements for calendar years 2018 through 2025.
  • All moving expenses are considered taxable to the employee and included as taxable income and proper taxes withheld (Federal, State, FICA) based on the W-4 on file with Payroll for individual employees.
  • If actual move happened prior to January 1, 2018:
    • Tax Compliance Office will apply tax law in effect prior to January 1, 2018
  • If actual move happened after December 31, 2017:
    • Tax Compliance Office will apply new tax law effective January 1, 2018

If you have any questions please contact the Tax Compliance Office at jose.carus@wisc.edu or (608) 262-0582.

Educational Assistance
Reimbursements to employees for job-related training are not taxable or reportable. To qualify as job-related, the training must be:

  • required by the employer or required as a condition to the retention of an established position or status (e.g., continuing professional education courses), or
  • taken to maintain or improve skills required in the employee's present position.

In addition, the training cannot be required to meet the minimum educational requirements for the employee's position or qualify the employee for a new trade or business. All other training is considered career-related.

Graduate and Undergraduate career-related tuition reimbursements are not taxable or reportable for tax reporting purposes unless they exceed $5,250 in a calendar year.  When the payments exceed $5,250 the excess over $5,250 is the only part reported by Accounting Services to the Human Resources System (HRS) and appropriate federal, state, and FICA taxes to will be withheld.  Only the excess over $5,250 will be included in gross income on employees' W-2 forms.

Accountable Plan Payments Made After 90 Day Rule
Policy 201 Travel's Accountable Plan

Tax Reporting Process for Employee Tax Reportable Fringes and Accountable Plan Payments Made After 90 Day Rule

  • Employee tax reportable fringes that flow through Accounting Services are (1) taxable non-overnight meals, (2) taxable moving, (2) non-taxable moving, (3) taxable educational expense reimbursements, and (4) taxable accountable plan (Non-Accountable Plan-NONA) payments (effective 01/01/2017).
  • Employee tax reportable fringes and non-accountable plan payments that flow through Accounting Services are sent through to the Service Center monthly for tax deductions from the employee's paycheck and to be added to the employee’s W-2 boxes 1, 3, 5, and 16 since they are treated the same as regular wages for tax purposes. Note that for educational expense reimbursements there is a $5,250 exclusion before it is taxable. Non-taxable moving amounts are sent to the Service Center for inclusion on their W-2 for informational purposes, but no taxes are withheld.
  • The two fringes that flow through Accounting Services that get broken out separately on the W-2 are non-taxable moving (box 12, code P) and taxable moving (box 14).
    • W-2 Box 12. Codes P – Non-taxable moving expense reimbursements paid directly to employee (not included in Boxes 1, 3, 5, or 16).
    • W-2 Box 14. Other - This box is used for additional information regarding taxable compensation or reimbursements. MOVE - This is the taxable portion of your moving expense reimbursements. Boxes 1, 3, 5 and 16 have been increased by this amount.
  • Foundation reimbursements and non-accountable plan payments are treated the same way as other fringes processed through Accounting Services. Foundation reimbursements are coded FNDT while non-accountable plan payments are coded NONA.

    See https://uwservice.wisc.edu/docs/publications/tax-w2-explanation.pdf.

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