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ACCOUNTING & TAXES AT BALL STATE UNIVERSITY

ACCOUNTING & TAXES AT BALL STATE UNIVERSITY. What you need to know! Spring 2010. Topic outline. New Independent Contractor Checklist Foreign National Payments Unrelated Business Income Tax (UBIT) Sales Tax New Prize/Award Policy. INDEPENDENT CONTRACTOR CHECKLIST. Use this form if:

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ACCOUNTING & TAXES AT BALL STATE UNIVERSITY

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  1. ACCOUNTING & TAXES AT BALL STATE UNIVERSITY What you need to know! Spring 2010

  2. Topic outline • New Independent Contractor Checklist • Foreign National Payments • Unrelated Business Income Tax (UBIT) • Sales Tax • New Prize/Award Policy

  3. INDEPENDENT CONTRACTOR CHECKLIST • Use this form if: • Payment to an individual/sole proprietor • Individual to work for 5 or more days over a 12 month period.

  4. Independent contractor checklist • Examples of when checklist will not be required (non-employee): • Performing artists (actors, dancers, musicians) • Speakers or Guest Lecturers • Athletic officials • Student teacher supervisors • Musical instrument tuners • Competition winners

  5. Independent contractor or employee? • Remember!!! • If an individual is a current employee, or has been an employee of Ball State within the last 12 months, they should be paid through Payroll. • This includes student employees. • Contact the Accounting Office if questions on Independent Contractor vs Employee status.

  6. Foreign National Payments • PLAN AHEAD!!

  7. Foreign NationalLong vs Short Term • If long-term assignment contact Rinker Center for International Programs before invitation is extended • If short-term assignment contact Accounting Office for procedures

  8. Foreign National Payments • Foreign national must complete BSU Foreign National Questionnaire. • Foreign National must provide copies of Visa and Passport. • Accounting Office will review to determine next step. • Accounting Office will provide guidance on next step.

  9. Foreign National Finding #1 • Foreign National possesses Visa type that does not allow income earnings in U.S. • BSU is unable to pay foreign national income.

  10. Foreign National Finding #2 • Foreign National meets Substantial Presence Test. • Must be paid as a Resident Alien (RA) • Must have a US ITIN • Must complete and sign W-9 • No taxes withheld

  11. Foreign National Finding #3 • Foreign National is resident of country with no treaty exemption • Must complete and sign W-8BEN • US federal taxes withheld at 30% • US ITIN not required, unless foreign national filing US tax return

  12. Foreign National Finding #4 • Foreign National is resident of country with a treaty exemption • Foreign National does not meet substantial presence test • US ITIN required to claim treaty exemption • Must complete and sign Form 8233 • BSU submits 8233 to IRS; wait 10 days for negative confirmation, then ok to pay • No taxes withheld

  13. Payment Request Foreign National • Department submits Payment Request Voucher or Foreign Cable Request to Accounting Office (see Formfinder) • Attach contract, agreement, and/or any additional documentation • Attach tax forms signed by payee (W-9, W-8BEN, or 8233)

  14. Tax Reporting - Foreign Nationals • NRAs – 1042-S – sent by March 15 • RAs – 1099-Misc – sent by January 31

  15. Quickest way to pay foreign natl • Foreign National can be paid more timely . . . But, • Must be here on appropriate Visa • We must withhold federal income tax at 30% • Foreign national can apply for US ITIN • Foreign national can claim treaty exemption on 1040-NR • Foreign national completes and attaches IRS Form 8233

  16. Sales tax – info bulletin #68State educational institutions Specifically for Colleges and Universities • Nature of exemptions • Sales • Purchases • Student Organizations

  17. Sales tax – nature of exemptions • Teaching and Instruction • Research • Public Service • Other University Activities undertaken in the conduct of governmental functions

  18. Sales tax – exempt sales by university Examples: • Sale of food by University to enrolled student “student” : (definition) • individual enrolled in for-credit classes and seeking an Undergrad or Grad degree. • Elementary or High School students registered for a summer conference

  19. Sales tax – exempt sales by university Examples: • Sale of educational materials (excluding books, stationery, or supplies) are exempt if sold to students as these sales are intended to further the educational purpose of the school. • Sales of interstate commerce • Sales to a purchaser who is entitled to an exemption of its own (government entity, etc) • Purchaser must supply the University with a valid exemption certificate

  20. Sales taxtaxable sales by a university Examples: • Sale of books, stationary, supplies • Sale of computers, software, peripherals • Sale of food and drink at athletic, theatrical, artistic, cultural or informational events. • Receipts from the rental of accommodations for periods of less than 30 days (innkeepers tax may also apply) except if a student is in a residence hall while participating in a for-credit course.

  21. Sales taxpurchases by university State colleges and universities are recognized as governmental agencies that qualify for exemption under IC 6-2.5-5-16. Must meet all three requirements: • The purchase must be invoiced directly to BSU. • The purchase must be paid for via government funds; and • The purchase must be for a governmental function

  22. Sales taxtelecommunications State educational institutions would be required to collect Indiana sales tax when they furnish or sell an intrastate telecommunication service to students, staff, or faculty. (i.e. long distance, cell phone, etc.)

  23. Sales tax student organizations 0-94XXX accounts are used by BSU to designate “recognized” student organizations. They may use the University’s exemption certificate for purchases and the University’s Retail Merchant Certificate for sales IF: 1. Must be “recognized” by BSU, and 2. Connected with BSU and under BSU supervision, and 3. Student Organization’s records must be maintained by the University as an “agency” account.

  24. Business Revenue and Taxes Unrelated Business Income (UBI) And Unrelated Business Income Tax (UBIT)

  25. UBIT Tax imposed on exempt organizations to level the playing field when they are competing with for-profit organizations that are performing the same activities.

  26. Three Qualifiers for UBI: • Trade or Business (and Profit Motive) • Regularly Carried On • Not Substantially Related

  27. BSU’s Exempt Purposes: • Instruction • Research • Public Service

  28. Exclusions: • Activities of volunteers • Items sold for the convenience of students or faculty • Qualified sponsorship activities • Student participation • Sale of donated goods or low-cost items • Special circumstances

  29. Generally excluded types of income: • Rental of real property • Research • Gain and losses from the disposition of property

  30. Overview of Allowable deductions: • Deductible expenses per IRS that apply to for-profit businesses • Directly connected to trade or business • Expenses attributable solely to unrelated business • Expenses attributable to dual use of facilities or personnel

  31. Cost Allocation Methodology: • IRS auditors operate under the theory that the burden of proof rests with the institution when claiming expenses are “primary and proximate” • Institution needs to provide documentation as to the reasonableness of all expenses

  32. Ubi questions? Each activity must be considered on a case by case basis. If you have any activities that you have questions about, contact the Controller’s Office.

  33. Award, prize, gift & Incentive policy (apgi) New Policy / Procedures / Forms Effective July 1, 2010 HOORAY!!!

  34. Apgi GIFT CARDS / GIFT CERTIFICATES ARE STRICTLY PROHIBITED – Under extremely rare occasions they may be permitted AFTER approval from the Controller’s Office

  35. Apgi Two Classifications of APGI: 1. Cash (ALWAYS TAXABLE) 2. Non-Cash (items are taxable unless one of the following apply) A. A ‘de-minimis’ fringe benefit B. A prize or award given directly to Foundation C. Employee Achievement Award

  36. Apgi A. Non-taxable ‘de minimis’: Prize or award… 1. is NOT CASH OR CASH EQUIVALENT, 2. IS of nominal value ($40) 3. IS provided infrequently Examples: BSU logo merchandise with useful life less than 1 year; Artist series tickets (Emens); Cardinal Lanes bowling; and meal tickets (on campus dining only)

  37. Apgi C. Employee Achievement Awards (cont’d) 1). Length of Service Awards – (includes: Retirement) a) More than 5 years service b) Cannot receive more than one every 5 years (unless retirement gift) c) Retirement gifts are distributed through Human Resources ONLY d) No gifts will be reimbursed by the Foundation 2). Safety Achievement Awards

  38. Apgi – how to process… If paying by CHECK or ACH Direct Deposit: Under $40 –(may qualify ‘de minimis’) 1. Payment Request Voucher 2. APGI Form (one per person) OR 2. Recipient List (for multiple recipients) Awarding department completes forms and routes to the Accounting Office.

  39. Apgi - How TO PROCESS… If paying by CHECK or ACH Direct Deposit: Over $40 up to $100 1. Payment Request Voucher 2. IRS Form W-9 for non-BSU persons 3. APGI Form w/BSU ID# (one per person) OR 3. Recipient List w/BSU ID# (for multiple recipients) Awarding department completes forms and routes to the Accounting Office

  40. Apgi - How TO PROCESS… If paying by CHECK or ACH Direct Deposit: Over $101 – (see next slide for non- student BSU employees) 1. Payment Request Voucher 2. IRS Form W-9 for non-BSU persons 3. APGI Form w/BSU ID# (one per person) OR 3. Recipient List w/BSU ID# (for multiple recipients) Awarding department completes forms and routes to the Accounting Office

  41. Apgi - How TO PROCESS… If paying by CHECK or ACH Direct Deposit: Over $101 – For non-student BSU employees 1. APGI Form w/BSU ID# (one per person) 2. Must be set-up and paid through HR/PEB as a miscellaneous payment. Awarding department completes forms and routes to the Payroll Office

  42. Apgi – how to process… If paying by CASH: (research incentives usually) To Request Cash: (set up receivable) 1. Miscellaneous Cash Advance Form To Clear Receivable: 1. Payment Request Voucher 2. APGI Form (one per person) OR 2. Recipient List (for multiple recipients) Awarding department completes forms and routes to the Accounting Office.

  43. Apgi – how to process… If paying by TANGIBLE PROPERTY: (same $$ thresholds apply as Check or ACH Direct Dep) 1. Purchase items using DPO(s) or PO(s) or the Computer showcase/Bookstore) 2. APGI Form (one per person) reference DPO/PO number etc. OR 2. Recipient List (for multiple recipients) reference DPO/PO number etc. Awarding department completes forms and routes to the Accounting Office.

  44. Apgi – how to process… If paying by TANGIBLE PROPERTY: cont’d • Items under $40 are considered ‘de minimis’ • Items valued over $40 requires BSU ID# of BSU-related recipients • Items valued over $40 requires IRS Form W-9 for non-BSU persons

  45. Apgi - reporting • Employees – Added to W-2 and subject to all taxes and withholdings • Student Employees – Added to W-2 • Other students, donors, unaffiliated individuals – Form 1099MISC if over $600 • Non-Resident Aliens – Added to Form 1042S

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