Taxes

1
Taxes Treaties for International Student
Employees

• Amanda Maines
• UB International Employment Tax Unit
• Suzanne Reusch
• New York State Department of Taxation Finance

2
AGENDA

• Tax Vocabulary
• Income Tax Treaties
• How To Claim a Tax Treaty Benefit
• U.S. Income Tax Withholding
• New York State Income Taxes

3
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

4
BACKGROUND ON 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

5
TAX VOCABULARY

• To withhold income taxes (tax withholding)
• to subtract income taxes directly from the
  employees paycheck
• Exempt from paying income tax (tax exemption)
• excused from paying income tax due to an income
  tax treaty

6
What about Income Tax Treaties?
7
INCOME TAX TREATIES

• Exist between the United States and 47 foreign
  countries
• 31 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

8
DIFFERENCES IN TAX TREATIES

• Most income tax treaties exempt earnings from
  income taxes while others reduce income taxes.
• There is a dollar limit on the amount of earnings
  that can be exempt from income tax.
• Wages earned over the exempt dollar limit will
  have income tax withheld.
• There is a time limit on the number of years that
  a foreign employee can benefit from the income
  tax treaty
• Begins from date of arrival in the United States

9
DIFFERENCES IN TAX TREATIES

• Retroactive clauses
• If the exempt dollar or time limit is exceeded,
  the wages may be taxed back to the first dollar
  earned.
• To find out more about a specific income tax
  treaty, see the Student Income Tax Treaties
  handout and IRS Publication 901.

10
How Do I Know if I am Eligible to Claim a Tax
Treaty Benefit?
11
STUDENT INCOME TAX TREATIES
12
U.S. TAXATIONPUBLICATION 901
13
What Do I Need to Do to Claim a Tax Treaty
Benefit?
14
FORMS USED TO CLAIM A TAX TREATY BENEFIT

• FORM 8233 Exemption from Withholding on
  Compensation based on a Tax Treaty
• Use this form to claim a tax treaty exemption.
• REVENUE PROCEDURE Required statement that is
  attached to Form 8233 verifying your exempt status

15
The International Employment Tax Unit will
prepare Form 8233 and the Revenue Procedure for
you.
16
PRE-FILLED FORM 8233
17
PRE-FILLED FORM 8233
18
PRE-FILLED FORM 8233
19
FORM 8233 SIGN PART III
Youra Name
1/10/08
20
REVENUE PROCEDURES

• The Revenue Procedures require Students,
  Teachers and Researchers to attach a statement to
  Form 8233.

21
Sample RevenueProcedure Statement
Youra Name
1/10/08
22
FORM 8233 OR FORM W-4?

• 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., then you will complete Form W-4
  instead.

23
W-4 Form
Youra Name
1/10/2008
24
How Do I Pay U.S. Taxes?
25
U.S. TAXATIONTAX WITHHOLDING

• Salaries, wages, or any other compensation for
  work paid to a nonresident alien employee are
  subject to tax.
• Withholding automatic deduction of income taxes
  from an individuals paycheck
• Your income taxes will be withheld from your
  paycheck by UBs Human Resource Services.

26
What About New York State Taxes?
27
NEW YORK STATE TAXES

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

28
NEW YORK STATE TAXESWhich form to use?

• For New York State Taxes, you will give to your
  new employer either
• IT2104 Employees Withholding Allowance
  Certificate ORIT2104E Certificate of
  Exemption from Withholding

29
NEW YORK STATE TAXESWhich form to use?

• IT2104 Employees Withholding Allowance
  Certificate Use this form if1) You intend to
  earn MORE than 7500 in gross income in New York
  State OR2) You can be claimed on another
  individuals federal income tax return and you
  intend to earn MORE than 3000 in gross income in
  New York State.

30
NEW YORK STATE TAXES - Form IT-2104
1/13/2008
Youra Name
DO NOT FILL THIS IN or ANY BOXES BELOW YOUR
SIGNATURE date
31
NEW YORK STATE TAXESWhich form to use?

• IT2104E Certificate of Exemption from
  Withholding
• Use this form if all three of these exist
• 1) You are a full-time student under the age of
  25 AND
• 2) You had no New York State tax liability in
  2006 AND
• 3) You DO NOT expect a tax liability for 2007
• NOTE If you are unsure complete IT-2104

32
New York State Taxes Form IT-2104-E
X
x
x
x
x
Youra Name
DO NOT FILL in this BOX or any boxes BELOW
SIGNATURE and DATE
33
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
• International Employment Tax Unit (UB)
• Amanda Maines [phone] ext. 1286
• amaines_at_business.buffalo.edu