INTERNATIONAL EMPLOYEES’ TAXES

1. INTERNATIONAL EMPLOYEES’ TAXES Internal Revenue Service - Barbara Dawkins Foreign National Tax Unit (UB) – Claudia Samulski Amanda Maines New York State - Suzanne Reusch

2. TAX VOCABULARY • IRS = Internal Revenue Service • Income Tax Return = form which all employees send to the IRS each year • to file an income tax return = to send it to the IRS • Income: money earned from a job, bank interest or investments • Wages or compensation: money earned only from a job

3. U.S. TAXATION • There are two types of income tax that employees in the U.S. pay: • Federal (U.S.) tax • State (New York) tax

4. TAX VOCABULARY • To withhold income taxes (tax withholding) • to subtract income taxes directly from the employee’s paycheck • Exempt from paying income tax (tax exemption) • excused from paying income tax due to an income tax treaty

5. FOREIGN NATIONAL INFORMATION WORKSHEET • All foreign employees should complete this Worksheet. • Gives us the information that we need to determine how to withhold income taxes • A new Worksheet needs to be completed each year that you are employed at UB. http://www.business.buffalo.edu/hrs/foreign_national_worksheet.pdf

6. FOREIGN NATIONAL INFORMATION WORKSHEET

7. FOREIGN NATIONAL INFORMATION WORKSHEET

8. FOREIGN NATIONAL INFORMATION WORKSHEET

9. FOREIGN NATIONAL INFORMATION WORKSHEET

10. FOREIGN NATIONAL INFORMATION WORKSHEET

11. INCOME TAX TREATIES • Exist between the United States and 47 foreign countries • 32 apply to students • Either reduce or exempt income tax on a portion of earnings • Apply only to federal and state tax • Based on country of foreign residence not citizenship

12. DIFFERENCES IN TAX TREATIES • Most income tax treaties exempt earnings from income taxes while others reduce income taxes. • Exempt dollar limits = the amount of earnings that can be exempt from income tax withholding • Wages earned over the exempt dollar limit will have income tax withheld. • Exempt time limit = the number of years a foreign employee can use the income tax treaty • Begins from date of arrival in the United States

13. DIFFERENCES IN TAX TREATIES • Retroactive clauses • If the exempt dollar or time limit is exceeded, exempt wages may be taxed back to the first exempt dollar earned. • To find out more about a specific income tax treaty, see the Student Income Tax Treaties handout.

14. STUDENT INCOME TAX TREATIES

15. TAX TREATY ELIGIBILITY

16. TAX TREATY ELIGIBILITY

17. TO CLAIM A TAX TREATY EXEMPTION • Complete required forms • Foreign National Information Worksheet • Form 8233 • Revenue Procedure • Submit forms to Foreign National Tax Unit • Forms can be accessed from our websites • Refer to the Resource Sheet provided in your packet.

18. CONTACT THE FOREIGN NATIONAL TAX UNIT • If you have any questions, please contact us. • Contact information is on the Resource Sheet.

19. U. S. TAX EXEMPTION & WITHHOLDING FORMS • FORM 8233 = “Exemption from Withholding on Compensation based on a Tax Treaty” • REVENUE PROCEDURE = Required statement that is attached to Form 8233 verifying your exempt status • W-4 = U.S. Income Tax Withholding form

20. U.S. TAXATION INTERNAL REVENUE SERVICE Form 8233 A nonresident alien individual should use this form to claim a tax treaty exemption from withholding on some or all compensation.

21. U.S. TaxationFORM 8233

22. U.S. TaxationFORM 8233

23. U.S. TaxationForm 8233 Part I Youra Name 400-00-0000 A Street Bejing China 1 University Lane Amherst, New York 14228 F-1 19983361828005 China 899503662 January 10, 2003 January 2006 x

24. U.S. Taxation Form 8233 Part II Teaching assistantship (income code 19) $5000 U.S./China Tax Treaty, article 20(c) all People’s Republic of China

25. U.S. TAXATION PUBLICATION 901

26. U.S. Taxation Form 8233 Parts III & IV Youra Name 1/21/03

27. Revenue Procedure87-8, 87-9 OR 93-22 Required Statement • The Revenue Procedures require Students, Teachers and Researchers to attach a statement to Form 8233.

28. U.S. TAXATION • To summarize, Form 8233 is used to claim exemption from income taxes because of a tax treaty. • If there is no tax treaty between your country and the U.S. OR you are not eligible to exempt your earnings from income tax, then you must fill out Form W-4.

29. Sample Statement

30. U.S. TAXATIONTAX WITHHOLDING • Salaries, Wages, or any other pay for personal services (work) paid to a nonresident alien employee is subject to the graduated withholding method. This is the same method used for U.S. citizens and residents.

31. U.S TaxationForm W-4

32. U.S. Taxation Form W-4 Work Sheet

33. U.S. Taxation Form W-4 Name x Youra 1 University Lane Amherst, NY 14228 400 00 0000 1 15.30 Youra Name 1/20/03

34. FICA WITHHOLDING(Federal Insurance Contributions Act) • Deductions appear as: • - Social Security tax • - Medicare tax • Nonresident alien J -1 and F-1 students and scholars engaged in authorized employmentare exempt.(Examples: campus work, practical training and economic hardship employment) • H-1B and TN visa holders are not exempt.

35. NEW YORK STATE TAXES • New York State complies with ALL Federal (United States) Tax treaties in accordance with the Internal Revenue Codes.

36. NEW YORK STATE TAXES • For New York State Taxes, you will give to your new employer either:IT2104 –Employee’s Withholding Allowance Certificate ORIT2104E – Certificate of exemption from Withholding

37. NEW YORK STATE TAXESWhich form to use? • IT2104 – Employee’s Withholding Allowance Certificate Use this form if:1) You intend to earn MORE than $7500 in gross income in New York State OR2) You can be claimed on another individual’s federal income tax return and you intend to earnMORE than $3000 in gross income in New York State.

38. New York State Taxes Form IT-2104 Youra Name 400-00-0000 x 1 University Lane Amherst, New York 14228 1 0 0

39. NEW YORK STATE TAXES Which form to use?IT2104E – Certificate of Exemption from WithholdingUse this form if:1) You intend to earn LESS than $7500 in gross income in New York State OR2) You can be claimed on another individuals federal tax return and you intend to earnLESS than $3000 in gross income in New York State.

40. New York State Taxes Form IT-2104-E Youra Name 400-00-0000 X 1 University Lane 05-30-81 Amherst, New York 14228 x x x x Youra Name 1/21/03

41. CONTACT INFORMATION • Internal Revenue Service • 1-800-829-1040 • http://www.irs.gov • New York State • 1-800-225-5829 • http://www.tax.state.ny.us/pit • Foreign National Tax Unit (UB) • (716) 645-5000 ext. 1286 or 1025 • http://ubbusiness.buffalo.edu Click on “Employee.” Scroll down to “Tax Facts.” Either choose “RF” or “State.” Click on “Foreign National Tax Unit.”