All U.S. nonqualified scholarship or fellowship payments made to nonresident aliens are subject to taxes and reporting to the Internal Revenue Service (IRS).
A "qualified scholarship" is one that pays for "tuition and fees, books, supplies, and equipment required for the courses at the educational institution," according to section 117 of the Internal Revenue Code. Qualified scholarship payments to nonresident aliens are not taxed or reported to the IRS.
Any part of the scholarship, fellowship, or grant that does not directly pay for the items mentioned above is considered nonqualified and is subject to taxes and reporting to the IRS. If you are a nonresident alien and a nondegree candidate or post-doctoral research scholar, the entire grant is subject to taxes and reporting to the IRS. Under section 1441, taxes must generally be withheld at the 30% tax rate. However, under Internal Revenue Code 871(c), if you are a nonresident alien in the U.S. on an F-1 or J-1 visa, you are taxed at only 14% on the taxable portion of the scholarship or fellowship payments. For more information, see Scholarships, Fellowships, and Grants for Nonresident Foreign National Employees.
Many countries have entered into reciprocal agreements with the U.S. in which the foreign resident can claim an exclusion from taxes. See Tax Treaty Countries for a list of treaty countries and types of treaty exemptions. Also see Claiming Tax Treaty Benefits for more information.
The type of form used to claim scholarship/fellowship treaty benefits depends on whether you are a nonresident alien or U.S. resident for tax purposes.
Use Form W-8BEN if you are a nonresident alien for tax purposes. The submitted form is valid until December 31 of the third calendar year following the year in which the form was submitted. It is valid indefinitely as long as you make payments at least once a year, the treaty benefits haven't expired, and you continue to be a nonresident alien for tax purposes.
Use Form W-9 and Attachment to Form W-9 if you are a resident for tax purposes and still qualify for treaty benefits. Once filed, these forms are valid indefinitely until your circumstances change (for example, you become a green card holder or citizen, or your treaty time limits run out).
- IRS Form W-9 Request for Taxpayer ID and Certification
- Attachment to Form W-9 for Tax Treaty Benefits (pdf)
All forms should be sent to:
319 15th Avenue SE
Minneapolis, MN 55455
All taxable scholarship or fellowship payments made to you as a nonresident alien are required to be reported to you and the IRS on Form 1042-S.