Nonresident Alien Taxation
Alien Taxation
and Forms
and Other Resources
Financial Aid Disbursements to Nonresident
Aliens (NRA)
Purpose
In order to comply with Federal (Internal Revenue Service and Treasury Department) and State (Franchise Tax Board) rules and regulations, each SFSU department must comply with these procedures when disbursing scholarships to recipients who are considered nonresident aliens for tax purposes. The Chancellor’s Office requires CSU campuses to comply with the Internal Revenue Code, California Revenue and Taxation Code, and California State University polices and procedures regarding nonresident alien taxation issues. Internal Audit and the Office of Student Financial Aid developed campus procedures to comply with when disbursing scholarships and fellowships to recipients who are considered nonresident aliens for tax purposes and is available on-line at: http://www.sfsu.edu/~audit/nrat/forms.htm. This procedure outlines the responsibilities of each campus department.
Procedures and Responsibilities
Step 1
Office of Student Financial Aid
The Office of Student Financial Aid (OSFA) developed an automated process (program) called “CITZ – Noncitizen program” that identifies potential nonresident alien students who are to receive a financial aid award (scholarships, fellowships, and other grants) disbursement. The automated program extracts information from the Financial Aid Computing System (FACS) and Student Information Management System (SIMS). The “CITZ” program:
A. Compiles a list of nonresident alien students who have at least $1 in financial aid award (scholarships, fellowships, and/or other grants) and
whose “citizenship status” in SIMS does not equal “Y, I, or R”.
1. US Citizen, or Permanent Resident Alien (“green card holder”)
If the student citizenship status equals “Y” - US citizen or “I” - Non-US citizen, Immigrant (applied for and received Form I-151 “Green
Card”), or “R” – Refugee, the “CITZ” program will not place a “financial aid hold” on the records of these students; OSFA will disburse these financial aid awards as part of their normal process.
2. Nonresident Alien:
If the student “citizenship status” does not equal “Y” or “I” or “R”, a list of nonresident alien students is compiled. The list is composed of
students with a SIMS “citizenship status” of “F1 - Non-U.S. citizen (visa student); J1 - Non-U.S. citizen (exchange visitor); N - Non-U.S.
citizen (undetermined status); O - Non-U.S. citizen other visa; and X - Citizenship undetermined.
B. Place a “Financial Aid Hold” (hold) on each student’s financial aid record. The hold prevents any funds from being disbursed to the student.
The hold message displays “MUST SEE AUDITOR” which means that the nonresident alien student must see the Tax Specialist in Internal
Audit for the hold to be removed. Internal Audit is the only department that can request to remove the hold.
Note: There will be occasions when Internal Audit will request OSFA (Scholarship Team) to provide a copy of the award letter or check from the
grantor/funding agency.
C. Further “edits” the list by EXCLUDING nonresident alien students who are only receiving loans (e.g. Perkins (PERK), Parent Loans
(PLUS), Outside Loans (OULO), Federal Loan or Grant Program (STUN, GSLP, PELL), College Work Study program (CWS), and
anything that is in “estimate” status. Loans and CWS are not considered taxable and can only be given to US citizens, green card holders, and
other eligible non-US citizens; these students are excluded from the list.
The result of step 1 – A, B, & C is a list of nonresident alien students who are scheduled to receive a scholarship, fellowship and/or other award disbursements. The “CITZ” program is scheduled to “run” and generate a list, twice a week (Wednesday & Friday nights).
Step 2
Internal Audit
The Tax Specialist will:
A. Perform a “File Transfer Protocol” to retrieve the data/list of nonresident alien students from FACS.
B. Review the list (and/or award letter, if applicable).
C. Contact the student (by email and/or letter) to:
1. Schedule an appointment to review his/her nonresident alien tax status and remove/lift the hold;
2. Inform him/her that additional information is needed and forms must be completed prior to the disbursement of the award(s).
Each nonresident alien student is required to complete a “San Francisco State University Foreign National Information Collection” Form. The data collected is entered into the nonresident alien tax software – WINDSTAR, International Tax Navigator and used to determine the nonresident alien student’s tax status.
D. Request the student to complete all required forms (including a Foreign National Information Form) and determine whether some or all of the
award(s) is exempt from federal and state taxes. A student may be exempt from Federal tax withholding under one of the following three
conditions:
1. If the award goes to pay for school tuition and fees (Internal Revenue Code, section 117);
2. If the award is considered foreign source;
3. If the award is exempt under a federal income tax treaty.
If an award is exempt from taxes, or not exempt from taxes, or the student declines to take advantage of the tax treaty, the Tax Specialist will prepare all applicable forms.
Mandatory: If a federal tax treaty exemption is available, and the student decides to take advantage of a tax treaty, a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) is required prior to taking advantage of the tax treaty (an IRS regulation). In addition, some federal forms will need the approval of the Internal Revenue Service before SFSU can grant a federal tax treaty exemption.
If the student does not have Social Security or Individual Taxpayer Identification Number, Internal Audit will provide the student:
• Form SS-5 - Application for a Social Security Card; used to obtain a social security number from the Social Security Administration Office; or
• Form W-7 - Application for IRS Individual Taxpayer Identification Number; a form for the nonresident alien to obtain an Individual Taxpayer
Identification Number from the Internal Revenue Service.
The student must complete and submit the form to either the Social Security Administration or Internal Revenue Service in person. A Federal tax treaty exemption cannot be granted if the individual does not have a valid SSN or ITIN. It is the student’s decision whether to take advantage of a federal tax treaty; it is not mandatory.
E. Based on the information provided and gathered, Internal Audit (IA) will prepare all the required SFSU, federal, and state forms and require
the student’s signature.
If the award payment is exempt from federal taxes:
The Tax Specialist will inform OSFA to release the financial aid hold status from FACS (using the “ENTR” screen) to disburse the award(s).
If the award payment is not exempt form federal taxes:
The Tax Specialist will enter the appropriate tax-withholding amount (e.g. 14 %) into the Accounts Receivable Module (ARM), then inform OSFA to release the financial aid hold status from FACS (using the “ENTR” screen) to disburse the award(s
Step 3
Office of Student Financial Aid
OSFA is responsible for ensuring that the “CITZ” program automatically releases the financial aid hold status (based on the information received from Internal Audit – via the “ENTR” screen in FACS). The award(s) will be disbursed through and automated financial aid disbursement program called ARM 55.
Note: Upon releasing the financial aid hold, it may take approximately one week before the award(s) is disbursed.
Step 4
Accounts Payable
Accounts Payable will print and mail checks accordingly, based on the ARM 55 output, normally scheduled on Thursday’s and Monday’s.
If tax withholding is applicable, the Tax Specialist will work with AP to ensure that all applicable tax-withholding amounts are forwarded to the IRS and FTB.
Step 5
Bursar’s Office
In the event that a manual check is needed due to unforeseen circumstances or problems, IA will work with the OSFA, Bursar’s Office, and Accounts Payable to ensure the scholarship award is properly disbursed, proper withholding is applied (if applicable), and any additional administrative task is completed.
The procedures above are the required steps that must be adhered to prior to disbursing financial aid award(s) to nonresident alien students. The above procedures do not fully describe the entire process but does outline the necessary steps the campus departments need to follow. Should a campus department need further clarification on the above procedures or need additional information regarding disbursing award(s) to nonresident alien students, they should contact Internal Audit and speak to Young Kim, Tax Specialist at (415) 338-2325.