For federal income tax purposes, foreign nationals are classified as resident aliens and nonresident aliens and are taxed at different graduated rates. Tax residency for federal tax purposes is determined by either the Substantial Presence Test or the Green Card Test. For information on determining your federal tax residency status, see Internal Revenue Service Publication 519, Chapter 1.
Federal income tax is withheld from nonqualified grant payments issued to nonresident alien post doctoral scholars, predoctoral fellows and trainees. Nonqualified expenses include room and board, travel, research, clerical help, or equipment and other expenses that aren’t required for enrollment in or attendance at an eligible educational institution. Visa holders in F-1 and J-1 status are taxed at 14%, unless a tax treaty benefit can be applied to the payment. Both treaty exempt and non-exempt fellowship and grant payments are reported to the payee and the Internal Revenue Service (IRS) on Form 1042-S. For information on determining the taxable portion of fellowship and/or grant payments, see “Scholarships and Fellowship Grants”, IRS Publication 519, US Tax Guide for Aliens, Ch 3, p.16.
The University of Pittsburgh is not required to withhold or report grant payments issued to resident aliens. Like other US persons, resident aliens are responsible for reporting and paying any taxes on these payments directly to the Internal Revenue Service (IRS). Please review the year end information for scholars, fellows, and trainees.
These fellowships and training grants are not taxable in Pennsylvania, because the primary purpose is to further the recipients education or training, and either they are not payments for services rendered or the benefits from any services performed are very minimal. Pennsylvania provides guidance on the taxability of fellowships and grants under section b of Title 61 Pa. Code §101.6.
Tax treaties make it possible to reduce or eliminate federal income tax withholding on payments to foreign nationals. Information provided on the Foreign National Information Form (FNIF) at the time of hire will be analyzed by the Payroll Department to determine tax treaty eligibility. Tax treaty benefits cannot be applied to your payments unless you provide a valid US social security number. If it is determined the employee is eligible for the treaty benefit, it will be applied to the employee’s pay in the manner specified in the treaty. To see if your country of tax residence has a tax treaty with the US, refer to the IRS tax treaty table in IRS Publication 901.
Additional Tax Information for Postdoctoral Scholars
The amount taxable to you includes your fellowship payment plus the value of all University-provided benefits. These amounts are listed on your pay statement under the heading Taxable Fringe Benefits. These amounts are combined for federal tax filing purposes on your Form 1042-S if you are a non-resident alien for tax purposes. Resident aliens do not receive a Form 1042-S for these payments. Please review the year end information for scholars, fellows, and trainees.
The State of Pennsylvania provides guidance on the taxability of fellowship grants under section b, line 5 of Title 61 Pa. Code §101.6. Local earned income taxability follows PA regulations for all municipalities, except Philadelphia.
Additional Compensation
If you receive multiple different payment types including additional compensation and/or transfer to a different position throughout the calendar year, please review this additional taxation information.
For more information regarding social security, tax treaty benefits, year-end information and FAQ's review the foreign nationals working in the US page on the payroll website.