UW–Madison is responsible for correctly classifying payments made to individuals. Misclassifying non-service payments as service-related payments, or vice versa, may expose UW–Madison and the individuals involved to significant adverse tax consequences and unintended financial aid, benefit, or visa eligibility implications.
This policy applies to UW–Madison hiring units, human resources offices, employing or hiring departments, anyone who processes fellowships and/or non-service appointments, or their designee.
This policy requires that an accurate determination be made about whether a payment made to an individual qualifies as a service (employment) or non-service (fellowship) payment. If the payment is determined to be non-service, the correct non-service title must also be identified.
In order to correctly classify and identify fellowship payments and non-service appointments, UW–Madison hiring units, human resources offices, employing or hiring departments, anyone who processes fellowships and/or non-service appointments, or their designee shall conduct a review and analysis of the payment and appointment with the Job Aid Form for Making Service vs. Non-Service Payment Determinations. This form will assist in correctly classifying payments to the individual and correctly identifying the individual’s appointment title. A link to this form appears in the Supporting Tools section of this policy. This form shall be retained pursuant to the applicable Record Retention Schedule. This form shall be made available for inspection and review for purposes of audits by the IRS, audits by the UW–Madison Office of Human Resources, and/or other reasons as allowed by policy, rule, regulation, and/or law.
The Job Aid Form for Making Service vs. Non-Service Payment Determination is intended to assist with making an accurate determination about whether a payment made to an individual qualifies as a fellowship or employment payment and provide guidance in choosing the correct title for a non-service appointment, from available titles within the Student Assistant or Post-Degree Training categories. Input from Research Administrators in order to complete the Job Aid Form may be necessary and appropriate.
Generally, a fellowship, traineeship or scholarship represents payment made to, or for the benefit of, an individual to aid the individual primarily in the pursuit of their own studies or research. These payments must be treated as non-service related income under an appropriate title. If, however, a payment to the individual is primarily for the required performance of teaching, research, or other services for the benefit of the university, it must be treated as employee wages in a service appointment under an “employee” title.
| Service Related Appointments | Non-Service Related Appointments |
|---|---|
| Service Related Income | Non-Service Related Income |
| Benefits University Primarily | Benefits Individual Primarily |
| Wages/Compensation | Fellowship/Scholarship income |
| Taxed through payroll | No taxation through payroll |
| W-2 | Fellowship Letter |
| Benefits Eligible | |
| Paid via Payroll | |
| Service Related Appointments | Non-Service Related Appointments |
|---|---|
| Postgraduate Trainee 1-7 PD005-PD011 | Postdoctoral Fellow PD003 (ET2) |
| Research Associate PD012 | Postdoctoral Trainee PD004 (ET2) |
| Research Intern PD013 | Adv. Opp. Fellow SA001 (SA1) |
| Housefellow/Resident Assistant SA003 | Graduate Intern/Trainee PD001 (ET4) |
| Lecturer (SA) SA004 | Fellow SA002 (SA1)* |
| Program Assistant SA005 | Scholar SA010 (SA1)* |
| Project Assistant SA006 | Trainee SA013 (SA1) |
| Program Assistant-Grader/Reader SA007 | |
| Project Assistant-Grader/Reader SA008 | |
| Research Assistant SA009 | |
| Teaching Assistant Standard/Senior SA011/SA012 | |
| Undergraduate Assistant SA014 | |
| Undergraduate Intern SA015 |
*For Fellow SA002 (SA1) and Scholar SA010 (SA1): This policy (and the job aid) does not apply when there are one time lump sum scholarship payments which must be paid via payroll on these titles, due to the recipient’s tax status as a nonresident alien.
UW–Madison is responsible for correctly classifying payments made to individuals. Divisions who fail to comply with this policy may be subject to retraining and/or discipline pursuant to applicable employee policies and procedures. Misclassifying service related payments as non-service related payments, or vice versa, may expose UW–Madison and the individuals involved to significant adverse tax consequences and unintended financial aid, benefit, or visa eligibility implications. For example, a department misclassifying a service related payment as non-service could be responsible for payroll tax withholding (FICA, federal and state income tax) for both the individual and UW–Madison, typically equal to more than 40% of the amount paid. Conversely, if a department misclassifies a non-service payment as a service payment, both the individual and UW–Madison would be required to make unnecessary FICA tax payments totaling approximately 15% of the amount paid.
UW–Madison hiring units, human resources offices, employing or hiring departments, anyone who processes fellowships and/or non-service appointments, or their designee shall conduct a review and analysis of any proposed non-service appointment payment by using the Job Aid Form for Making Service vs. Non-Service Payment Determinations available with this policy. Completion of this form will assist with correctly classifying payments and identifying non-service appointments. This form shall be retained pursuant to the applicable Record Retention Schedule. This form shall be made available for inspection and review for purposes of audits by the IRS, audits by the UW–Madison Office of Human Resources, and/or other reasons as allowed by policy, rule, regulation, and/or law.
If assistance is needed in order to review and analyze a payment and/or a non-service appointment beyond use of the Job Aid Form described above, hiring units, human resources offices, employing or hiring departments, and anyone who processes fellowships or non-service appointments or their designee are encouraged to contact and work with Department or Division level Research Administrators or Division HR Staff who can answer questions about the appointments and issues related to funding. The Office of the Vice Chancellor for Research -Human Resources is available to answer questions regarding Student Assistant appointments. The Office of Postdoctoral Studies is available for questions about postdoctoral appointments.
SYS 235 Attachment 7: Requirements for Payments to Nonresident Aliens (Account Code 5714)
04-05-2019,12-01-2021
