We're recruiting a prospective student (non-resident alien) and reimbursing him for travel...


Q (cont.): Is this considered reportable for the student? If the travel had been for a prospective employee, it wouldn't be considered reportable income. Our tax department is going to withhold 30% from the travel, but we're the ones pursuing the student, and it seems like a business expense to the university and not a taxable situation for the recipient.

A. According to tax experts Cokala, reimbursed expenses that are subject to an accountable plan (under which you obtain receipts, and have proof of a business purpose) are not subject to 1042-S reporting.

The business purpose is clear—interviewing the candidate for possible enrollment.  If he provides documentation of his expenses to you, then the reimbursement is not reportable.  

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