The Application of Payroll Taxes and Tax Treaty Benefits

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The Application of Payroll TaxesandTax Treaty
Benefits
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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

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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

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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.

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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

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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

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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

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• Honorarium and Travel Payments forNon-Resident
  Aliens

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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.

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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)

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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!

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Designated people

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

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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.

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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

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

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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

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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)

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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.

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Questions?