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The following information is being provided to help departments troubleshoot the processing of non-salary, non-travel, and non-purchase order requests for payment. It includes general instructions for the major category of payments as well as forms and their specific instructions. If you have any unusual circumstances outside these categories, please contact Accounts Payable in advance, as this will save time and eliminate the need for returned invoices. The following is a list of our most frequently returned invoice problems and should serve as a guideline or checklist before submitting an invoice:

• Missing or incorrect Chart Fields
• Missing signature or incorrect signature
• Math or computational errors
• Lack of original receipts or indication of business purpose
• Incomplete vendor address or tax information

Vouchers generally fall into the following categories:

Reimbursements: Payments to individuals or employees. To avoid tax consequences, these requests must be supported with actual receipts and an explanation of business purpose. The Accounts Payable System has been loaded with employee and student address information, and these are the addresses to be used for checks. Special check handling requests should be kept to a minimum as it requires additional data elements and slows down processing time.

Independent Contractors: Individuals, businesses or organizations providing services to the University are considered independent contractors. Accounts Payable must report their annual cumulative payments to the Internal Revenue on Form 1099.

In all cases, we require a W-9 to be completed by the individual. This protects the University from any penalties resulting from any reporting of incorrect tax ID numbers. The current penalty is 30 percent of the paid amount, any social security tax, and a fine of $50.00 per return. Accounts Payable must also provide an address on all returns; this address will be used for tax reporting.

Vendor Purchases: Non-Employee, Non-Student payments for goods and services not contracted through the Purchasing Department.

Petty Cash: A separate policy exists for replenishment of Petty Cash funds and appears below or can be obtained by calling the Accounts Payable main telephone extension.

Employee Moving: Payments for moving expenses are reportable to the IRS and require all supporting documentation as well as the Employee Moving Reimbursement Form, whether paid to an employee or third party.

Student Payments: Payments to students generally fall under educational or non-educational payments. For tax purposes, these categories have been printed on the Student Invoice.

Prizes and Awards: All prizes and awards follow the same rules as payments to independent contractors. If they are for students or employees, a W-9 is not required as they have completed a W-4 and Accounts Payable will be updates with this information. Student prizes will be discussed in detail under the student invoice section as well as non-resident alien rules.

Wire Transfers and Foreign Drafts: Under certain circumstances, vendors or individuals require payment in foreign currencies or funds wired to bank accounts.

Invoice Forms & Specific Instructions

1. Reimbursements (Complete the following information on the invoice)
   a. Name
   b. Address where drafts are to be sent
   c. Firm invoice date
   d. Description of reimbursement
   e. Net amount and Currency type
   f. Distribution amount
   g. Distribution line (account, org, project/grant, fund, budget year)
   h. Signature of reimburse
   i. Department Head signature
   j. Visa Type if applicable
   • All invoices must be supported with actual receipts and an explanation of business purpose.
   • There could be tax consequences if there are no substantiating receipts. Special handling requests should be kept to a minimum.
   • All reimbursements to employees require two signatures.
2. Independent Contractor, Honoraria, and Professional Services (Complete the following information on the invoice)
   a. Name
   b. Address where check is to be sent and tax reporting address if different
   c. Tax ID number required (see W-9 Form)
   d. Firm invoice date
   e. Description of reimbursement
   f. Net amount and Currency type
   g. Distribution amount
   h. Distribution line (account, org, project/grant, fund, budget year)
   i. Department Head signature
   j. Visa Type if applicable
3. Vendor Purchases (Complete the following information on the invoice)
   a. Name
   b. Address where check is to be sent
   c. Vendor invoice date
   d. Quantity
   e. Item description
   f. Net amount and Currency type
   g. Distribution amount
   h. Distribution line (account, org, project/grant, fund, budget year)
   i. Department Head signature
   • All invoices must be supported with a vendor’s bill and an explanation of business purpose.
   • Special handling requests should be kept to a minimum.
4. Petty Cash
   Petty Cash policy is provided below.
   Insert form and policy.
5. Moving Expense Reimbursements
   The 1993 tax act changed the requirements for reporting moving expenses. In addition to the misc. invoice and all standard documentation, receipts, signatures, etc., employees must complete and sign the Princeton University Employee Moving Expense Information form. A common problem with this type of reimbursement is that care is not given to make sure the expense categories on the form agree with the receipts.

Student Invoices

1. Graduate Student Reimbursement, Educational/Non-Educational

   Complete the following information on the invoice:
   a. Pay To
   b. Student Name
   c. Social Security Number
   d. Graduate or Undergraduate
   e. Enrolled or Non-enrolled
   f. Nonresident Alien, yes or no
   g. If Nonresident Alien, Permanent Residence
   h. Description
   i. Net Amount
   j. Distribution Amount
   k. Distribution Line (acct, org, project/grant, fund, budget year)
   l. Department Head Signature
   m. Visa type if applicable

   All invoices must be supported with actual receipts and an explanation of business purpose. Special handling requests should be kept to a minimum.

2. Graduate Student Prizes/Awards
   Complete the following information on the invoice:
   a. Pay To
   b. Student Name
   c. Social Security Number
   d. Graduate or Undergraduate
   e. Enrolled or Non-Enrolled
   f. Nonresident Alien, Yes or No
   g. Visa Status information is required if individual is a non-resident alien.
   h. If Nonresident Alien, Permanent Residence
   i. Description
   j. Net Amount
   k. Distribution Amount
   l. Distribution Line (acct, org, project/grant, fund, budget year)
   m. Department Head Signature

Substantiation is not necessary unless reimbursement for business related expenses to Associates in Research. Please provide a detailed business description on the invoice.

If expenses incurred by students represent University Business, the Voucher must be signed by the Principal Investigator. Signature space is provided on the line marked, "Approved University Business (Receipts Attached)".

3. Undergraduate Student Payments

In order to facilitate payment to undergraduate students we have organized them in the following categories. After choosing a category, activate the associated link and you will be directed to the appropriate Form or Process, where more specific categories and instructions will be provided.

Advances - Advances will only be made when performing a University business related Activity and requires receipts to be turned in to the Treasurer's Office and the advance must be reconciled against documented expenses.
http://web.princeton.edu/sites/TreasurersOffice/OperationsSupport/InvoiceProcessing
/Files/Forms/CashAdvanceVoucher.pdf

Business (NonTravel) Expenses incurred by University Employees
http://web.princeton.edu/sites/Treasurersoffice/OperationsSupport/InvoiceProcessing
/Files/Forms/EmployeeVoucher.pdf

Business Expense Incurred by University Employees
http://web.princeton.edu/sites/TreasurersOffice/OperationsSupport/InvoiceProcessing
/Files/Forms/EmployeeBusinessExpenseReport.pdf

Expenses of Recognized Student Organizations
http://web.princeton.edu/sites/Treasurersoffice/OperationsSupport/InvoiceProcessing
/Files/Forms/UndergraduateStudentVoucher.pdf

List of Approved Campus Organizations
http://www.princeton.edu/odus/activities/organizations/campus/

Payment to further Studies or Education of a Student, Prizes or Awards recognizing accomplishment
http://web.princeton.edu/sites/Treasurersoffice/OperationsSupport/InvoiceProcessing
/Files/Forms/UndergraduateStudentVoucher.pdf

Salaries, Wages, Compensation and Internships / Grants (internal to Princeton University) - Time Collections
https://isserver11.princeton.edu

Refund - Student Accounts and Student Loans
http://web.princeton.edu/sites/Treasurersoffice/OperationsSupport/InvoiceProcessing
/Files/Forms/UndergraduateStudentVoucher.pdf

Tax Reporting of Non-Salary Payment to Students

This capability is designed to facilitate the processing of Undergraduate Student Vouchers.  The use of the drop downs will provide the information required to document the purpose of a payment and the tax implications, while also expediting the processing.  The user is directed to select among five categories:

Once selecting an option a link will bring the user to the appropriate site or form.  To assure the proper interpretation of the tax status of the funding a drop down list is provided on the form.  By selecting from this list the description of the purpose of the payment will be reflected in the voucher.  Beside the list a report of the tax option is available.  It is imperative that only those descriptions that have been previously assessed be selected.

The above guide is intended to illustrate tax treatment of fellowship and scholarship awards given to students who are U.S. citizens or resident aliens.  Special rules apply to recipients who are nonresident aliens.  Fellowship amounts for nonresident aliens are generally subject to tax withholding at  14% and will be reported on IRS Form 1042S.   

The IRS considers “non-qualified” fellowships and scholarships amount to be taxable income, reportable by the recipient, on his/her personal tax return.  According to IRS notice 87-31, neither the grantor nor the educational institution is required, under section 6041, to file a return of information (W-2 or 1099 Misc) to IRS with respect to such grants.  It is the responsibility of the recipient, to report taxable non-qualified fellowship or scholarship payments to IRS.  For additional information on the income taxability of non-qualified fellowships and scholarships, please see IRS Publication 970, Tax Benefits for Education and IRS notice 87-31.

To conform to IRS rulings, the University will provide U.S. Citizens and Resident Aliens with a letter at the time of disbursement, of taxable income to be reported by the recipient.  Please note that Resident Alien is a tax term and is not an immigration term and refers to foreign nationals who either have a green card, or meet the “substantial presence test” described by the IRS.  All other nationals are classified as non-resident aliens.

Prizes and Awards - Monetary payments for achievement, performance or a competition that are not related to employment services are considered taxable income to the student.  They are not taxable if the recipient chooses to have the prize or award paid directly to a designated charitable organization. If the following conditions are met, the University is not required to report the amount on Form 1099 or 1042-S:

1. the payment is primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement,
2. the recipient was selected without any action on his/her part to be considered for the award,
3. the recipient is not required to render substantial future services as a condition of receiving the award, and
4. he payment is made by the payer directly to a tax-exempt public charity or governmental subdivision designed by the recipient.  IRC Sec. 74(b).

The taxability of scholarships generally depends on the type of expenses that are paid with the benefit and whether the person receiving the benefits is a candidate for a degree.  If one is a candidate for a degree, and the scholarship is used to pay qualified educational expenses such as tuition and fees, books, supplies, and equipment, required for enrollment, your benefit would generally be tax free.

 For tax purposes, scholarships are amounts that benefit an undergraduate student attending an educational institution in pursuit of a degree.
 Fellowships are amounts paid for the benefit of an individual in the pursuit of study or research.  In both cases, the benefits that qualify for tax exclusion are those that are used to pay for qualified expenses of a degree candidate. 

Tax Free Scholarships and Fellowships:

• Candidate for a Degree
• Eligible Educational Institution
• Qualified Educational Expenses

Payment for Service:

Any payment for services is generally taxable.  This applies even if all students must perform the services as condition for obtaining a degree.  To the extent these services are compensated, the compensation would be taxable income.  If part of your scholarship or fellowship is payment for teaching, research, or other services you performed under the programs below and you are a candidate for a degree, and you use that compensation to pay for qualified educational expenses, your compensation is not taxable:

National Health Services Corp Scholarship Program
Armed Forces Health Professions Scholarship and Financial Assistance Program,

If you receive a grant that has a condition requiring you to perform future services, the entire amount of the grant is taxable, even though you are a candidate for a degree and the grant is being used to pay your educational expenses. 

Are Scholarships and Fellowships Taxable?

1. Is the payment to the student to further his or her education or studies?
   
   
   • a.) YES- then its a scholarship or fellowship
   
   
   
   1. Next question: Is the payment for tuition at a qualified education institution, books, mandatory fees or mandatory equipment?
      
      
      • a.) YES = Qualified scholarship - NOT TAXABLE, No reporting
      
      
      
      • b.) NO = Nonqualified scholarship - TAXABLE
        
        
        • i.) Is the student a NON resident alien?
          
          
          • YES = Reporting on 1042-S & withholding of tax
          
          
          
          • NO = NO reporting, but letter informing them its taxable
          
          
          
   • b.) NO - if payment is not a scholarship.
     
     
     1. Next Question:  Is the payment a reimbursement of business expenses incurred by the student as an EMPLOYEE or INDEPENDENT CONTRACTOR ( means the student is receiving compensation for services from the University) in conducting University business?
        
        
        • YES = NOT TAXABLE, no reporting as long as we receive Business Expense Report & supporting receipts
        
        
        
        • NO = Why are we paying expenses that are not business or education related?

There are certain circumstance that may apply to all invoice types but require special handling. They are non-resident alien payments, wire transfers, and foreign drafts.

Non-Resident Alien Payment

The following outlines the procedure for processing non-salary payments to Non-Resident Foreign Nationals. These payments do not include reimbursement of business related expenses supported with actual receipts, or work performed outside U.S. boundaries.

http://web.princeton.edu/sites/TreasurersOffice/OperationsSupport/OperationsSupport/
InvoiceProcessing/Files/Forms/EmployeeBusinessTravelExpenseReport.pdf

Accounts Payable must withhold 30% from these payments, unless the individual qualifies for exemption under a Tax Treaty. The individual must apply for the exemption by submitting IRS Form 8233 to Accounts Payable at least 30 days prior to receiving payment. Form 8233 is valid only for the calendar year indicated on the form and cannot, therefore, be kept on file and carried over into other years. The individual must compete all the information requested under Part I “Non-Resident Alien Identification” and sign the Form. Accounts Payable will complete Part II and send the form to the IRS. If we do not receive the completed Form 8233 at least 30 days prior to the date payment is expected to be made, we will withhold taxes at the 30% rate or delay payment so that the Form 8233 can be processed and the IRS holding period met to qualify for the treaty exemption.

There are restrictions on payments of honoraria and professional services to individuals traveling under B1, B2, WB,WT, or F1 Visa's. In order to be confident that those restrictions are met we require the "Affidavit of Honoraria Eligibility for B1, B2, WB, WT, or F1 Visa Holders" to be submitted with the request for payment to these individuals.

Please be aware that all payments are reportable to the IRS, therefore a home address is required. This is a required field on Form 8233, but where a treaty exemption is not being requested, the address must be provided on the Voucher.

The following outlines the procedure for processing scholarship and prize payments to Non-Residents Foreign Students:

Candidate for a degree refers to a student who is enrolled in a degree-seeking program as well as a student attending a college or university that grants degrees, even if the student will not be granted a degree at the end of his period of study.

Since reporting is required on all payments to nonresident aliens, a home address must be supplied on the voucher. An Exemption applies to Non-Resident Foreign Students whose expenses are a part of their duties as an Assistant in Research. These expenses fall into the same rules as for faculty and staff i.e. business purpose and actual receipts. In almost all cases, these expenses must be charged to the same grant or contract as the AR Stipend. If an AR travels or incurs expenses on any other grant or contract you must document the relationship by describing the AR’s assignment to the Sponsored Accounting Section of the Financial Office in advance of submission of the Invoice to Accounts Payable.

Link to IRS Income Tax Treaties:
http://www.irs.gov/businesses/international/article/0,,id=96739,00.html

Instructions for Form 8233:
http://www.irs.gov/pub/irs-pdf/i8233.pdf

IRS Form 8233:
http://www.irs.gov/pub/irs-pdf/f8233.pdf

Payments for Services Rendered Outside the United States

When you are making payments for Services rendered outside the United States, you must obtain an IRS Form W-8BEN The W-8BEN is required:

• To establish that the Vendor is not a U.S. Person.
• To claim that the Vendor is the beneficial owner of the income to which that payment applies.
• To certify that the income is not effectively connected with the conduct of a trade or business in the United States.

The W-8BEN must be submitted with the voucher at least 30 days prior to when payment is due. Failure to timely provide the W-8BEN may result in withholding at a rate of 30%. FORM W-8BEN is required for all forms of payment including but not limited to checks, wire transfers, foreign drafts.

Instructions for Form W-8BEN:
http://www.irs.gov/pub/irs-pdf/iw8ben.pdf

IRS Form 8233:
http://www.irs.gov/pub/irs-pdf/fw8ben.pdf

Charitable Contributions

When making charitable contributions use account code 278 and verify that the vendor is listed on IRS Publication 78. If not listed in IRS Publication 78 then the contribution should be charged to acct 578.

IRS Publication 78: http://apps.irs.gov/app/pub78

Wire Transfers

In addition to all other invoice processing requirements, Wire Transfer requests must include complete instructions for the receiving bank; these include Name and Address of the bank, Swift Code or ABA Number, account number, and the name on the account at the bank. Please note, Wire Transfers are not substitutes for direct deposits for such payments as Employee Travel Reimbursements. Wire Transfers are time consuming and expensive. It has been our experience that some banks will charge additional fees to the recipient of a wire transfer; these are out of our control and not a reimbursable expense.

As part of their on-going effort to standardize cross-border payments, European banks are increasingly relying on IBAN (International Bank Account Number) numbers along with bank SWIFT BIC codes. IBANs are now available for all banks in the European Economic Union.

To encourage the use of IBANs, European banks are now charging extra fees for payments that do not include IBANs, and starting in 2007 they will start rejecting payments without IBANs. Because of these factors, we highly recommend that all your Euro payments include the beneficiary IBAN and the bank Swift BIC code. Your beneficiary should be able to provide you with IBANs and SWIFT BIC codes.

IBAN(International Bank Account Number)

The IBAN is an account identifier, but it is not a new account number. It is simply a new format for an existing bank account number that is recognized internationally.

How is the IBAN constructed?
The IBAN is a series of alphanumeric characters that uniquely identifies an account held at a bank anywhere in the world.

The IBAN consists of:

• an ISO code of the country: 2 first characters
• a check code: 2 second characters
• BBAN (Basic Bank Account Number): domestic account number of the beneficiary

Due to the fact that each of the EU countries has different bank account systems, the length or the IBAN can be different country by country, up to a maximum of 34 characters.

Foreign Drafts

When payment is to be made in a foreign currency be sure to indicate the currency type in the space provided on the invoice.