Wages and Taxes
International interns, trainees, or professionals who receive a stipend as part of their program are generally paid on the same schedule as other employees – weekly or bi-weekly – either by check or direct deposit into their bank account. Participants must be paid as regular employees and cannot be paid as independent contractors (i.e. using IRS Form 1099-Misc).
All international participants who receive a stipend are required to pay some but not all taxes paid by U.S. citizens.
Participants must pay:
- Federal income tax
- State income tax
- Local or city income tax (if applicable)
Participants do not pay:
- Social Security and Medicare tax (FICA)
- Federal unemployment tax (FUTA)
At the end of the tax year, host organizations must send IRS Form W-2 to all international interns, trainees, and/or professionals who were paid. If the participant’s program takes place in two or more tax years, you must send a W-2 each year. Be sure to collect and confirm your participant’s home address before their program ends; that way you can mail their W-2 even if they have already left the country. (Alternatively, if your organization uses an online system to distribute W-2s, confirm that your participant(s) have and retain access even after they leave the U.S.)
All international interns, trainees, and professionals must apply for a Social Security number unless they already have a Social Security number from a previous visit to the U.S. Applying and processing of Social Security applications can take several weeks; however, it is legal for your participant to start their program during this waiting period.
A Common Withholding Mistake
If FICA/FUTA has been withheld from your participant’s paycheck by mistake, you will need to change withholding taxes for all future paychecks and remind your participant to claim a refund when filing their federal tax return. (See instructions for IRS Forms 941 and/or 944 for more information).