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The Application of Payroll Taxes and Tax Treaty Benefits

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Honorarium and Travel Payments. for. Non-Resident Aliens. Rules of Engagement ... Honorarium recipient (other than J-1) will become a Resident Alien after being ... – PowerPoint PPT presentation

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Title: The Application of Payroll Taxes and Tax Treaty Benefits


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
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9
  • Honorarium and Travel Payments forNon-Resident
    Aliens

10
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 hell stay.
  • Schedule an Interview and figure out the payment
    process.

11
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)

12
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!

13
Designated people
  • Anne Davenport
  • Patricia Bailey
  • Carol Jessica Lee (to be removed/replaced)

14
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15
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.

16
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, 162 and 274

17
Travel ProceduresSame requirements as an
employee, plus the Foreign National Information
(FNI) formTravel authorizationTravel
reimbursement
18
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

19
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

20
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)

21
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22
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,
    theres 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.

23
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