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The Application of Payroll Taxes and Tax Treaty Benefits

The Application of Payroll Taxes and Tax Treaty Benefits. Student & Faculty Employees. IRS Form 8233 (for federal & state tax exemption) Non-Resident Alien employees from Tax Treaty Countries can claim treaty benefits on Form 8233 The form must be completed in the Payroll or Tax Office

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The Application of Payroll Taxes and Tax Treaty Benefits

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  1. The Application of Payroll TaxesandTax Treaty Benefits

  2. Student & Faculty Employees IRS Form 8233 (for federal & state tax exemption) Non-Resident Alien employees from Tax Treaty Countries can claim treaty benefits on Form 8233 The form must be completed in the Payroll or Tax Office An employee must have a social security number to claim a Treaty Benefit or work in the United States Social Security Office Suite 300 5800 Executive Center Drive Charlotte, NC 28212

  3. Payroll Requirements • Payroll must forward the completed Form 8233 to the IRS with original signatures • All employees must complete a W-4 and NC-4 • All Non-Residents must file as “single” • Can only claim zero or one exemption (0 or 1) • W-4 must have “NRA” printed on line 6. • Business apprentices and students from India are exempt from the NRA withholding rules, so write “INDIA” on the W-4 rather than “NRA”

  4. Payroll Requirements • Form 8233 must be completed each year.Payroll will send reminder notices to employees in November or December. • At the end of the calendar year, a 1042-S is issued to each NRA showing exempt wages and a W-2 for any taxable wages.

  5. Windstar Software Analysis Information must be entered into the Foreign National software, Windstar, for analysis. Documents required: • UNC Charlotte Foreign National (Student) Information (FNI) Form, completed and signed • A six year history of U.S. presence must be completed along with notification of any prior Visa status • Copies of the I-94, Visa, DS-2019 or I-20, Passport, and Social Security card should accompany the FNI form

  6. Social Security and Medicare Tax • F-1 and J-1 employees are exempt • §3121(b)(19) specifically exempts nonresident alien students, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other aliens temporarily present in the United States in F-1, J-1, M-1, Q-1/Q-2 nonimmigrant status • Exemption lasts for 2-5 years (depending on Immigration status) • §3121(b)(10) exempts “students” in their 6th year

  7. FICA Exempt employment: • On-campus student employment up to 20 hrs/week • Off-campus student employment allowed by USCIS • Practical Training student employment on or off campus • Employment as professor, teacher or researcher • Employment as a physician, au pair, or summer camp worker

  8. Honorarium and Travel Payments forNon-Resident Aliens

  9. Rules of Engagement • Every person from every country is going to be different. • As soon as you know someone is coming, call or e-mail the Tax Manager • Find out the country, the Visa status, what the visitor is going to do and how long he’ll stay. • Schedule an Interview and figure out the payment process.

  10. What to Bring, email or send • NC Foreign National Information Form • Passport, Visa, I-94 • DS-2019 or other Immigration document. • Social Security # (if any)

  11. NEW : ACCEPTANCE AGENT STATUS • Certifying Acceptance Agents can designate individuals to be able to Certify that a document is authentic in the place of the IRS or Embassy. • Prepare a W-7 for an ITIN attaching our Certification. • File the W-7 with the IRS and the ITIN will be returned to UNC Charlotte. • Provide a treaty benefit for an un-numbered person!

  12. Designated people • Anne Davenport • Patricia Bailey • Carol Jessica Lee (to be removed/replaced)

  13. Contractor Honoraria caveats (1) The exemption is not available at all if the dollar limit is exceeded (2) Maximum Presence Test and dollar limits operate separately. Total compensation can be exempt even if the presence limit is exceeded (3) Treaty applies only if the services are performed for a resident of Pakistan (4) Treaty with the former USSR covers Armenia, Azerbaijan, Belarus, Georgia, Kyrgystan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan Note: Even though some treaties have “no limit” for the maximum presence test, a lecturer or researcher or other Honorarium recipient (other than J-1) will become a Resident Alien after being in the U.S. more than 183 days. Resident Aliens may not use a treaty for independent personal services.

  14. Travel Payments • Office of State Budget and Management - Policy Manual, Effective July 2005 • Office of State Controller Foreign National Payment Policy, August 2004 • Accountable Plan Rules : IRC §62, §162and §274

  15. Travel Procedures:Same requirements as an employee, plus the Foreign National Information (FNI) formTravel authorizationTravel reimbursement

  16. Documentation • Original Receipts attached for all reimbursements • Hotel • Airline Ticket • Taxis, parking, tolls • Meal receipts (only employees can claim per diem) • Other required travel costs (laundry) • Get information BEFORE they leave

  17. Student Travel • Business Purpose – required by employer • Accountable Plan Rules. • Match travel fund to wages fund • Travel with a group or with a class • Scholarship rules (normally 14% withholding) • Treaties for scholarships are fairly common • Athletic Travel - exempt

  18. Scholarships, Fellowships, Awards • Tuition scholarships are usually excluded under IRC §117(d). This covers undergraduate tuition and fees and graduate tuition and fees for Teaching and Research Assistants. • Other scholarships have a 14% withholding rate for F & J visa holders (others 30%)

  19. Awards and Prizes • All Awards and prizes are subject to 30% tax withholding • Recipient of award/prize should provide all Foreign National Information (W-8BEN, passport, visa, I-94, I-20…) • If you increase the award for the withholding, there’s tax on the increase, then tax on the tax. You can “gross up” the payment. • Example: Payment of a $100 award: • Gross up the amount ($100 divided by .70 = $142.86) • The expense account would be charged $142.86 • Federal taxes are $42.86 • The recipient receives $100.00 • There is disagreement as to whether an award can be considered a Scholarship when provided to a student entering a scholastic contest. --- I believe the position is defensible on two fronts. EAD allowed employment and scholarship definition.

  20. Questions?

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