MASSACHUSETTS PERFORMERS TAX ADMINISTRATOR'S FAQs
What tax rate applies to the Massachusetts withholding?
Whether the University pays an individual or an entity for such services, the University must now withhold Massachusetts income tax on payments at the current tax rate.
Whose services are subject to this type of withholding?
The following chart shows examples frequently encountered at Harvard. For clarification on fact patterns not covered below, please contact Tax Reporting, firstname.lastname@example.org.
Subject to this withholding
Not subject to this withholding
Public speakers or visiting lecturers, either in a classroom or other setting, speakers at symposia or on other panels
Leased employees with nonpaid appointments in PeopleSoft
Actors, actresses, dancers, musicians, comedians, celebrities, directors, writers, coaches, designers, sound, light, stage and production crew members, persons providing live simultaneous translation at the event, and event organizers connected with performance(s) or events
Caterers and others providing tangible goods or space rental at events / photographers and those videotaping an event provide tangible goods in the form of photographs and videotapes / DVDs or similar media
Agent or manager of a performer or performing entity, as well as an owner or leader of a performing entity, which is defined to mean “[a] corporation, partnership, limited partnership, limited liability company, corporate trust or other entity that employs, engages, or comprises one or more performers.”
Awardees and prize recipients, unless they are also speakers at the event, in which case please discuss particular facts with UTS to reach determination
Paid athletes, whether individual or team members, as well as the team owners, agents, managers, referees, coaches and trainers
Student advisors and student tutors, who tutor one-on-one (as distinguished from those who teach group tutorials, which are like seminars / classes)
I have seen and heard the term “invited guest” used at the University. How does this analysis apply to people, whom I have seen classified as “invited guests?”
Historically, the term “invited guest” has been used at the University to describe certain people, who come to the University for a limited period of time as visiting lecturers, performers, non-employee researchers and in other similar roles. Use of the term arose for historical reasons and, given that it has caused confusion and has no basis in tax compliance definitions, we are moving away from use of that term. Virtually all of the individuals who have been called “invited guests” are, in fact, independent contractors with respect to the University, who receive payments for services in the form of honoraria or analogous fees.
What causes withholding to begin?
Withholding will begin on payments to an individual or entity, who has received payments aggregating to more than $5,000 during the calendar year, taking into account all payments made across the University to the particular vendor of the sort subject to this type of withholding, except that:
Payments treated as nontaxable expense reimbursements under the accountable plan rules are not included in the $5,000 total (see below for coding suggestions)
Certain exceptions to withholding are available
Please note that the payment that takes the aggregate payments for this lecturer / performer over the $5,000 threshold for this calendar year will be subject to withholding in its entirety.
Example: Lecturer A was paid $4,000 by School M for speaking at a three-day symposium in March. No withholding occurred on the $4,000. In June, Lecturer A was paid $1,500 by School G for speaking at a one-day conference, at which there were several speakers whose payments for services aggregated to more than $10,000 for the event.
Result: $1,500 payment will be subject to withholding at current tax rate
Example: Lecturer B was paid $6,000 by School M, for speaking at a symposium at which there were several speakers whose payments for services aggregated to more than $10,000. Of the $6,000 lump-sum payment received by Lecturer B, the lecturer used $1,500 to offset expenses. Payment for Lecturer B's expenses was not part of the contract between the lecturer and School M. Lecturer B applied to the DOR and was granted the ability to reduce the $6,000 withholding base by allowable expenses.
Result: $4,500 will be subject to withholding at the current tax rate. Please note: even though the withholding base is below the $5,000 threshold, the gross payment by the University is over $5,000, so the DOR requires withholding (on the actual payment minus allowable expenses).
Example: Lecturer C was paid $4,500 by School M for speaking at a one-day conference, at which there were several speakers whose payments for services aggregated to more than $10,000 for the event. In addition, School M reimbursed Lecturer C for $2,000 in travel expenses and complied with School M's accountable plan procedures with respect to that reimbursement, allowing the $2,000 reimbursement to be excluded from Lecturer C's reportable income.
Result: $4,500 is not subject to withholding, because amounts excluded under the accountable plan rules are University business expenses and not included in calculating the $5,000 threshold
How should I code the lecture fees, honoraria or other service payments subject to Massachusetts withholding?
Two object codes have been designated for charging service payments to independent contractors, which are potentially subject to this form of Massachusetts withholding:
8690 Lecture Fees, Honoraria and other service payments made to visiting lecturers and performers for which no exception to MA withholding is sought (automatic tax withholding)
8692 Lecture Fees, Honoraria and other service payments made to visiting lecturers and performers for which an exception to MA withholding is sought (payment holds apply). The exceptions are:
Total for all payments for services for the event equals $10,000 or less, including all payments for services to performers, lecturers and other persons providing services in carrying out the event, whether payments are to individuals or entities.
Note: The $10,000 exception is calculated separately for each event.
Expenses: In calculating total dollars spent on payments for services, include any expenses paid by the University to or on behalf of the performer / lecturer, which are not covered by the accountable plan rules
Excluded Payments: In calculating total dollars spent on payments for services, you may exclude payments for this event for which a performer / lecturer has been granted a waiver from withholding from the Massachusetts Department of Revenue.
Performance outside of Massachusetts
The performer / lecturer has filed one of the following applications with the Massachusetts Department of Revenue more than ten days prior to the date of the event and the Harvard department wants to have the payment held until after the University has received the relevant communication from the DOR:
Notice of Withholding Waiver (Form PWH-WW) [to waive withholding]
Notice of Allowable Deductions (Form PWH-RW) [to reduce the payment amount on which withholding is calculated by any expense reimbursement portion of the payment]
In determining whether or not an event qualifies for the $10,000 exception, do you include all amounts paid with respect to the event?
No; you include only service payments made to payees, who receive the type of payment subject to Massachusetts withholding on performers in connection with the event. Do not include the following types of payments: room rental, payments to caterers, and payments to Harvard employees (e.g., audio-visual staff).
How do I decide whether to code a particular disbursement to 8690 or 8692?
Each department will make a decision appropriate to the particular facts of the department and lecturer / performer, but the following guidelines may be helpful:
Use 8690 when the department wants the AP system to calculate the withholding automatically, with no additional paperwork from the department beyond the usual WV or WVR documentation:
Aggregate payments for services in connection with an event over $10,000 and the event is in Massachusetts (unless DOR waiver / reduction for expenses processes are relevant)
Result: Withholding will occur with respect to any lecturer / performer whose payment total exceeds the $5,000 threshold
Regardless of the dollar total for the event, each lecturer / performer is being paid $5,000 or less for this event and the department believes that each such performer has been paid $5,000 or less, including payments for this event, by all parts of the University during this calendar year
Result: No withholding because each lecturer / performer's total is under the minimum dollar threshold
The lecturer / performer is being paid more than $5,000, either in the payment in question or together with prior payments from the University during the calendar year, and the department and lecturer / performer have agreed that the best choice is for withholding to occur, so that the lecturer / performer will have the funds on account with the DOR when his or her tax return is filed
Result: Withholding at the current tax rate
The department either does not know that the lecturer / performer is applying for a waiver or reduction of withholding under the DOR procedures or the department knows and must send the deposit or other payment to the lecturer / performer sooner than the DOR will send the DOR certificate to the University
Result: Withholding at the current tax rate on payment, with a refund to the lecturer / performer of any overwithholding if, as and when the University receives the DOR certificate
Use 8692 when the department wants to complete the Attestation Form and to assemble the necessary documentation in order to qualify for an exception from withholding:
Aggregate service payments for an event are $10,000 or less and at least one lecturer / performer being paid will be over the $5,000 threshold, either through this payment or through aggregate payments received from the University during the calendar year
Result: No withholding for the payment for this event on any service providers paid in connection with the event
Event is outside Massachusetts
Result: No withholding
Distinctions and uses for 8692 and 8690 http://oc.finance.harvard.edu/how-to/payments-performers-lecturers-admin-faqs. The tax status of an individual (U.S. or foreign national) should not impact which object code is used, but the outcome of tax reporting could be different.
The directive relating to 8692 requires departments to include an attestation with the invoice and PR, since an exception to the MA performer’s tax is sought by nature of using that object code see Attestation Form Billing Code 8692. One of the exceptions indicated on the attestation is for performances outside of MA. All payments using object code 8692 will always be put on a “hold” for review to see if it meets an exception sought for MA withholding tax.
8690 should always be used for services viewed as performances in MA, no matter the U.S. tax status of an individual (see administrator FAQs for examples what constitutes a “performer”). The MA withholding will kick-in if the payment itself is over $5000, or the individual has received payments from Harvard aggregating to more than $5,000 during the calendar year.
Since departments sometimes are not clear on the use of 8692, or have difficulty in understanding the “hold” review it requires, 7980 was suggested as a possible alternative for services performed outside of MA. This still allows for the payments to be captured for reporting (if required), and eliminates any confusion relating to MA performers tax issues. The use of 7980 is not ideal in all cases, if the use of 8692 and 8690 seem to be more to be in line to what your payment is intended for.
No matter the object code, any income payment being processed (fellowship/ grant/ prize/ awards and services specifically), require basic information that must be indicated on the invoice (or “in Lieu of invoice” form) for audit purposes. These details will impact reporting or withholding requirements as outlined by IRS and MA DOR regulations:
- Type of income payment
- Gross amount to be paid
- Dates of fellowship/ grant/ prize/ awards or services
- Location of where fellowship will be performed or where services were provided
Example: $4000 Honoraria payment to Professor John Chen as guest speaker in Portugal for the Harvard CBD Program on 10/ 30/2015
How should I code travel expenditures and related expenses?
You must code travel expenses that are excludable under the accountable plan rules in travel object codes, rather than in 8690 / 8692 (or they will be aggregated with the service payments). Any expense reimbursements or payments, which are not excludable under the accountable plan rules, must be coded to 8690 or 8692 in order to be aggregated properly with the service payments.
Is there any specific information, which I must include in my disbursement request (web voucher, web voucher reimbursement, wire transfer or ACH payment request)?
The following information must appear in the “Description” field of your disbursement request in order to provide University Tax Services with the information needed to meet the reporting requirements of the Massachusetts Department of Revenue: Date(s) of event / Location of event / Name of event.
If an amount is withheld from a disbursement and a department believes that the withholding is incorrect, how should the department proceed?
The department should contact Accounts Payable Customer Service (5-8500). Accounts Payable and University Tax Services will work together to validate the refund request and refund any amounts determined to be overwithheld.
How do the withholding rules apply when a Department hires an event planner or other coordinator, who contracts for all or part of equipment rental for the event, caterers, audio-visual service providers and performers?
The Department should ask the event planner whether the event planner / coordinator plans to submit either a Form PWH-RW "Performer or Performing Entity Request for Reduction of Withholding" or a Form PWH-WW "Performer or Performing Entity Request for Waiver of Withholding” to the DOR (must be done at least ten business days before the event). An event planner might choose to submit a Form PWH-RW in order to include payments to performers and performing entities in the underlying reported expenses, so that the University only withholds on the net amount (i.e., only the event planner's fees). An event planner might choose to submit a From PWH-WW to eliminate University withholding altogether.
Withholding by the University will be credited to the vendor (in this case the event planner) to whom the University made payment(s) on that vendor's Form 1099 or Form 1042-S, as relevant. The University cannot alter the vendor to whom the withholding has been credited, even if the Department knows that the event planner / coordinator subsequently paid others with funds received from the University. The only procedure for altering credit of the relevant withholding amounts within the DOR is for the event planner / coordinator to communicate directly with the DOR, in order to request that the DOR reassign credit for withholding to any others to whom the event planner / coordinator has made subsequent payments. This does not involve additional withholding on the part of the event planner / coordinator, but only a transfer of credit for withholding within the DOR. The DOR does not yet have a form for this purpose, but is working on one, and has indicated that it will accept and act on correspondence in the meantime.
If the event planner answers “yes” and indicates that he or she has filed a Form PWH-RW, then code to 8692 and withholding will be calculated on the amount permitted by the DOR [Caveat: DOR approval arrives shortly before the event, so payment to the event planner / coordinator would likely be made after the event];
If the event planner answers “yes” and indicates that he or she has filed a Form PWH-WW, then code to 8692 and, if the DOR approves the waiver request, then the University will not withhold on the payment to the event planner / coordinator [Caveat: DOR approval arrives shortly before the event, so payment to the event planner / coordinator would likely be made after the event];
Until such time as the DOR has a form for this purpose, the event planner / coordinator and the Department may choose to have the Department pay separate invoices for payments subject to Massachusetts withholding from performers / lecturers, so that withholding by the University is credited to the tax I. D. number(s) of the ultimate recipients of the payments. Choosing this business practice is, however, within the discretion of the Department.
Whom should I contact with questions?