Foreign Source Income
Foreign Source Income is income for activity performed and received while an individual in nonresident alien tax filing status is living outside the U.S.
No action is required for U.S. Citizens and Permanent Residents.
Foreign Nationals without U.S. Permanent Residency
There are tax implications for foreign nationals working outside the U.S. Because of this, UW–Madison is required to track all U.S. presence for foreign nationals on payroll. Depending on an employee’s tax status, they may or may not be subject to U.S. taxes while working for UW–Madison.
UW–Madison will collect documents from employees to verify their tax status and determine the appropriate payroll taxation. It is very important that employees working outside the U.S. complete everything accurately and submit the documents in a timely manner. Failure to submit documents may result in inaccurate tax withholding from the paychecks. The employee’s divisional human resources department will contact the employee with more information about the required documents.
Note: UW–Madison can direct deposit payments only to U.S. bank accounts. If the employee has a U.S. bank account, they can provide that account information either through MyUW or by mailing a paper direct deposit form. If the employee does not have access to a U.S. bank account, they may need to have payments wire transferred. The employee may be responsible for paying fees related to the wire transfer. Employees need to notify their human resources department as soon as possible if they think they will need a wire transfer. Failure to do so may result in delayed payment.
It is the employee’s responsibility to notify the Office of Human Resources (OHR) at firstname.lastname@example.org when they enter the U.S. At that time, UW–Madison will require them to maintain a Glacier account for the duration of their appointment.
Responsibilities for Foreign Nationals Telecommuting Outside the U.S.
Complete the following documents and submit them to your human resources department:
- Nonresident Alien U.S. Visit Summary or Glacier Tax Summary Report
- Foreign Source Income Statements
- I-94 Travel History (Must include all entries and departures. If an entry or departure is not listed, you must write it in, then sign a statement that the I-94 is valid to the best of your knowledge. See I-94 Travel History Requests on the U.S. Customs and Border Protection website.)
The days present on the Nonresident Alien U.S. Visit Summary, Foreign Source Income Statements, and I-94 Travel History must all match.
If there is a discrepancy between documents, your department will reach out to you for clarification and modification. They will then submit the documents to OHR, who will review the documents for accuracy and may collect updated Glacier documents from you.
It is your responsibility to notify the Office of Human Resources (OHR) at email@example.com and firstname.lastname@example.org when you enter the U.S.
Employees who are resident aliens will have taxes withheld from their paychecks and can adjust their withholding settings.
Employees who are nonresident aliens will (in most cases) have taxes withheld from their paychecks. They cannot adjust their withholding settings. In the fall, the employee’s foreign source income file will be reconciled. An employee with no U.S. presence in the calendar year will have taxes refunded. Employees with presence will have taxes withheld, prorated to the number of days present.
Division and Department Responsibilities
Employees may have questions regarding the Foreign Source Income process and the documents they need to submit to the Office of Human Resources. In order to answer these questions at the Division level, we strongly encourage HR and Payroll staff to become familiar with Glacier and the FSI process. Please take the online Glacier training, which will provide context for Glacier and the FSI process. Further steps in the Foreign Source Income process, and how you can advise your employees, are detailed in Division Responsibilities for Employing Foreign Nationals Telecommuting Outside the U.S.
Departments employing foreign nationals outside the U.S. need to collect the employee’s documents listed above. Please use the Divisional Foreign Source Income Tracking Template to track these records and as a cover sheet to the file. After review, send an email to email@example.com to request a single-use link to upload the documents to the secure Campus Payroll Inbox.
Divisions should confirm with employees if they have access to a United States bank account. For employees without a United States bank account, divisions must also collect wire transfer information. Wire transfers must be submitted via the wire transfer workflow. Please share this information with your employees since they need to initiate the process through their MyUW Portal. Shared Services needs wire transfer information at least 7 days before the final calc. Note that divisions may have different deadlines.
Departments must also submit a complete wire transfer form, when appropriate.
Office of Human Resources (OHR) Responsibilities
OHR Payroll must first determine an employee’s U.S. tax residency.
- U.S. citizens and resident aliens require little to no further action.
- Nonresident aliens follow the foreign source income process:
- OHR Payroll receives notification that a division is employing a foreign national who works remotely from outside the U.S.
- OHR Payroll requests documentation from the division that includes any combination of the following:
- Glacier paperwork
- Nonresident Alien U.S. Visit Summary
- Foreign Source Income Statements
- I-94 Travel History (Must include all entries and departures. If an entry and/or departure is not listed, the employee must write them in, then sign a statement that the I-94 is valid to the best of their knowledge)
- Writing in entries and departures is fairly common, since U.S. Customs and Border Patrol does not always keep accurate record of foreign national entries and departures.
- This is especially true for Canadian and Mexican citizens.
- For employees without a United States bank account, divisions must also collect wire transfer information. Wire transfers must be submitted via the wire transfer workflow.
- The division must send an email to the OHR Foreign Source Income Team at firstname.lastname@example.org for a single-use link to the Secure Campus Payroll Inbox.
- OHR Payroll then reviews these documents for accuracy. Any discrepancy in the documentation requires follow-up and, in some cases, supplemental documentation.
- Once the employee arrives in the U.S., they must contact OHR Payroll to set up a Glacier account and collect Glacier documents from the employee.
- Then, in the fall, OHR Payroll contacts each employee to reconcile the file. (Ask for all the same paperwork to confirm their U.S. presence, or lack thereof, for the year).
- OHR Payroll determines tax residency status, and submits a ticket to UW Shared Services for final processing. UW Shared Services calculates the amount to be refunded.