Payments to Employees
Payments to employees for entertainment or performance services are considered by the IRS to be Special Interest Hobby Payments, i.e., a payment to an employee for an activity, which could be considered a hobby or recreational vocation. These payments cannot be related to the regular duties performed by the employee at the university. These employees will receive an IRS form 1099MISC at calendar year end.
Required Payment Forms
- Submit through Oracle
- IRS Form W-9, Request For Taxpayer Identification Number
- Vendor Invoice or Contract/Agreement
Payments to US Citizen and Permanent Resident Visitors
All payments to visiting entertainers and performers who are US Citizens or Permanent Residents must also be reported to the Internal Revenue Service. US Citizens and Permanent Residents will receive an IRS form 1099MISC at calendar year end.
Payments to US Citizens
- Submit through Oracle
- IRS Form W-9, Request For Taxpayer Identification Number
- Vendor Invoice or Contract/Agreement
Payments to Permanent Residents
- Submit through Oracle
- IRS Form W-9, Request For Taxpayer Identification Number
- Copy of Permanent Resident or Resident Alien card (green card) or copy of the I-551 Stamp that is printed on the applicant's passport
- Vendor Invoice or Contract/Agreement
Payments to Aliens (Non-US Citizens)
Payments to Performers/Artists/Athletes are the most complex payments made and are on the IRS radar, so the University of Chicago is diligent about researching the requirements/laws and consulting attorneys and experts at the IRS regarding these types of payments. Each document we require is necessary to prove due diligence for correctly making performance payments.
Many factors must be considered before allowing an individual to perform on our campus. The Independent Contractor Services Supervisor should review (or be consulted on) any contracts prior to signing to ensure any details regarding the actual payment can be honored. Departments who sign contracts that are not able to be honored by payroll will be responsible for any additional taxes/penalties that may occur in keeping with a signed contract.
The information provided below is a general guideline. Due to the complex nature of performer payments, each payment must be evaluated on a case-by-case basis. Payroll Services will determine the facts of the situation and make determinations of payment.
STEP I - WHO IS THE BENEFICIAL OWNER OF THE INCOME?
Only Payroll Services is able to determine who the beneficial owner of the income is after reviewing the documents and questionnaire. Payroll Services will analyze the facts of the situation, not only statements made by the performer/entity. Factors which contribute to determining the owner of the income:
- Is the University of Chicago (UC) paying for a performer rather than a performance?
- Is the UC paying for a performance of unnamed individuals (symphony, dance group, etc.)?
- Is the UC paying for a performance, but one or more individuals are named performers?
- Is the UC paying for a performance, but has knowledge that the performer(s) are independent contractors?
- Does the UC have knowledge that an entity is acting as an agent for an individual performer?
- Does the UC have knowledge that the entity is owned and/or controlled by the performer?
Once the beneficial owner of the income is determined, then the performer must come to the US to perform the services on the appropriate US Visa, although the actual beneficial owner of the income is the one to complete the appropriate paperwork.
PERFORMER AS BENEFICIAL OWNER OF INCOME:
Must come to the US with an appropriate visa status and the Performer must complete paperwork
- UPP-192
- W-8BEN for Non-Residents for Tax; W9 for Residents for Tax
- Copy of I-94
- Copy of US Visa Passport picture page including date and entry status (if appropriate)
- Copy of Visa Status Document (If visa status is not sponsored by UC, then individual must provide sufficient proof of payment eligibility by UC) Visa status must be reviewed by payroll to ensure eligibility.
- Vendor Invoice or Contract/Agreement
Common performer visa status are listed:
- O1/P1/P2/P3 sponsored by UC - I-797 Notice of Action
- O1/P1/P2/P3 NOT sponsored by UC - I-797 Notice of Action; I-129 petition which must include UC as a performance venue (or proof UC was added after USCIS approved petition)
- B1/B2 - can only receive an honoraria payment. For performance to be considered honoraria the performer must adhere to the 9/5/6 rule, the performance must have academic/educational value, and no tickets should be sold.
Must have SSN/ITIN and complete form 8823 to be eligible for a tax treaty.
US AGENT/COMPANY AS BENEFICIAL OWNER OF INCOME:
- Must complete paperwork under agent/company name
- W9 Form
- Vendor Invoice or Contract/Agreement
FOREIGN AGENT/COMPANY AS BENEFICIAL OWNER OF INCOME:
- Must complete paperwork under agent/company name
- W-8BEN (individual) or W8-BEN-E(entity)
- Must have an EIN, complete ALL of Part I (including #5 and the corresponding section) and Part II of W-8BEN-E to be eligible for a tax treaty
- Vendor Invoice or Contract/Agreement
In the case of named performers in performance groups, the named performer will be considered the beneficial owner of the income and be required to complete the paperwork as "Performer;" the remaining performance members may be considered employees of the agent/company/entity and the entity will be required to complete the paperwork for "Agent/Company."
STEP 2 - ENSURE PERFORMER ENTER THE US UNDER THE PROPER US VISA.
Performance Fee: If the payment is determined to be a performance fee, individuals must come to the US under the correct visa. There are approximately 40 visa types an individual can enter the US under; however, there are only a few that would allow performances. There are some cases where individuals who are in the US under certain visa types which allow for unrestricted work authorization (J2), but these are rare cases. We will proceed with the assumption most individuals will be coming from outside of the US as non-residents for tax. Common visas for performers are O1/P1/P2/P3 (see above for required documents). Honoraria: If the payment is determined to be honoraria, individuals must come to the US under the correct visa, which is only a B1 or VWB. The performer must not have provided "services" for longer than 9 days at more than 5 institutions in the past 6 months i.e. the 9/5/6 rule.
STEP 3 - REVIEW TAX TREATY ELIGIBILITY
Payroll Services will determine tax treaty eligibility. Payroll Services has the right (and requirement per IRS regulations) to not accept any tax treaty where we deem eligibility cannot be readily determined or if the facts provided do not clearly establish eligibility.
Performers as beneficial owner of income
- Must have SSN or ITIN to be tax treaty eligible.
- Must be from a tax treaty eligible country.
- Must adhere to the regulations of the tax treaty (i.e. maximum presence in the US; maximum amount of compensation). UC may request an additional statement from the performer to prove performer will not exceed time or dollar limit of the tax treaty.
- Must fully complete form 8233.
Agent/Company as beneficial owner of income