Transcript Slide 1

NRA Workshop 3-15-2007
The University of North Carolina at Charlotte
The Application of Payroll Taxes
and
Tax Treaty Benefits
1
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
2
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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”
3
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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.
4
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Windstar Software Analysis
Information must be entered into the Foreign National
software, Windstar, for analysis.
Documents required:



5
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
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
6
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
7
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Income Tax Treaties Relating to Payroll
Student
Teacher/
Researcher
Belgium
X
X
Latvia
X
Canada (1)
X
X
Lithuania
X
China
X
X
Luxembourg (4)
X
Morocco
X
Netherlands (4)
X
X
Commonwealth of Ind States (2)
Student
Teacher/
Researcher
X
Cyprus
X
Czech Republic
X
X
Norway
X
X
Egypt
X
X
Pakistan
X
X
Estonia
X
Philippines
X
X
France
X
X
Poland
X
X
Germany (4)
X
X
Portugal
X
X
Greece (3)
X
Romania
X
X
Hungary
X
Slovak Republic
X
X
X
Slovenia
X
X
X
Spain
X
Iceland
X
India (4)
Indonesia
X
X
Thailand (4)
X
X
Israel
X
X
Trinidad and Tobago
X
X
Italy
X
Tunisia
X
Jamaica
X
United Kingdom (4)
Japan
X
Venezuela
Korea, Republic of (South)
X
X
X
X
X
(1) Canadians must earn less than $10,000 for the year in order to receive benefit.
(2) Commonwealth of Independent States, Former USSR-US Tax Treaty still covers some countries.
(Armenia, Azerbaijan, Belarus, Georgia, Kyrgystan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan)
(3) Treaty excludes researchers.
8
(4) Benefits lost if person overstays exemption period.
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
The University of North Carolina at Charlotte
Honorarium and Travel
Payments
for
Non-Resident Aliens
9
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Designated people
Anne Davenport
Patricia Bailey
Carol Jessica Lee (to be removed/replaced)
13
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Income Tax Treaties Relating to Honoraria/Contractor Fees
Australia
Austria
Barbados (1)
Belgium
Canada
China
Cyprus
Czech Republic
Denmark
Egypt
Estonia
Finland
France
Germany
Greece (1)
Hungary
Iceland
India
Indonesia
Ireland
Israel
Italy
Jamaica (1)
Japan
Kazakhstan
Korea, South (2)
Latvia
14
Maximum
Presence
Maximum
$ Amount
183 days
No Limit
89 days
182 days
No Limit
183 days
182 days
183 days
No Limit
89 days
183 days
No Limit
No Limit
No Limit
183 days
183 days
182 days
89 days
119 days
No Limit
182 days
183 days
89 days
183 days
183 days
182 days
183 days
No Limit
No Limit
$ 5,000
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
$ 10,000
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
$ 5,000
No Limit
No Limit
$ 3,000
No Limit
Maximum
Presence
Lithuania
Luxembourg
Mexico
Morocco (2)
Netherlands
New Zealand
Norway
Pakistan (3)
Philippines (2)
Poland
Portugal
Romania
Russia
Slovak Republic
Slovenia
South Africa
Spain
Sweden
Switzerland
Thailand (2)
Trinidad and Tobago(1)
Tunisia (2)
Turkey
Ukraine
United Kingdom
U.S.S.R., former (4)
Venezuela
183 days
No Limit
182 days
182 days
No Limit
183 days
182 days
183 days
89 days
182 days
182 days
182 days
183 days
183 days
No Limit
183 days
No Limit
No Limit
No Limit
89 days
183 days
183 days
183 days
No Limit
183 days
183 days
No Limit
Maximum
$ Amount
No Limit
No Limit
No Limit
$ 5,000
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
No Limit
$ 10,000
$ 3,000
$ 7,500
No Limit
No Limit
No Limit
No Limit
No Limit
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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.
15
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
16
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Travel Procedures:
Same requirements as an employee,
plus the Foreign National
Information (FNI) form
Travel authorization
Travel reimbursement
17
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
18
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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
19
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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%)
20
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Income Tax Treaties Relating to Scholarships
Time Limit 5 years (unless noted)
Resident
Aliens too?
Exemption
Limit
Resident
Aliens too?
Exemption
Limit
Belgium
Yes
No Limit
Luxembourg
Yes
No Limit
China (1)
Yes
No Limit
Morocco
Yes
No Limit
Commonwealth of Ind. States (2)
No
$ 9,999
Netherlands (4)
Yes
No Limit
Cyprus
Yes
No Limit
Norway
Yes
No Limit
Czech Republic
Yes
No Limit
Philippines
Yes
No Limit
Egypt
Yes
No Limit
Poland
Yes
No Limit
Estonia
Yes
No Limit
Portugal
Yes
No Limit
France
Yes
No Limit
Romania
Yes
No Limit
Germany (3)
Yes
No Limit
Russia
Yes
No Limit
Iceland
Yes
No Limit
Slovak Republic
Yes
No Limit
Indonesia
Yes
No Limit
Slovenia
Yes
No Limit
Israel
Yes
No Limit
Spain
Yes
No Limit
Japan (old treaty)
Yes
No Limit
Thailand
Yes
No Limit
Kazakhstan
Yes
No Limit
Trinidad and Tobago
Yes
No Limit
Korea, South
Yes
No Limit
Tunisia
Yes
No Limit
Latvia
Yes
No Limit
Ukraine
Yes
No Limit
Lithuania
Yes
No Limit
Venezuela
Yes
No Limit
(1) No Maximum time limit.
(2) Commonwealth of Independent States, Former USSR-US Tax Treaty still covers the following countries:
Armenia, Azerbaijan, Belarus, Georgia, Kyrgystan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan
(3) Maximum time limit is 4 years.
(4) Maximum time limit is 3 years.
21
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
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)
–
–
–
–
22
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.
The University of North Carolina at Charlotte
Office of the Controller
NRA Workshop 3-15-2007
Questions?
23
The University of North Carolina at Charlotte
Office of the Controller