Tax Workshop for Foreign Nationals - Tax Services
Tax Workshop for Foreign Nationals - Tax Services
Tax Workshop for Foreign Nationals - Tax Services
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<strong>Tax</strong> <strong>Workshop</strong> <strong>for</strong> <strong>Foreign</strong> <strong>Nationals</strong><br />
February 12, 2013<br />
Presented by:<br />
Kiran Samran<br />
Manager of <strong>Tax</strong> <strong>Services</strong><br />
1715 Canal Street (Mondo Building)<br />
Merced, CA 95340
Agenda<br />
‣<strong>Tax</strong> Updates<br />
‣Residency <strong>for</strong> tax purposes<br />
‣GLACIER<br />
‣Income and Withholding at U.C. Merced<br />
‣<strong>Tax</strong> Reporting<br />
‣Resources
<strong>Tax</strong> Update<br />
‣Delayed filing <strong>for</strong> certain <strong>for</strong>ms to include<br />
Form 8863 (Beginning Feb. 14)<br />
– American Opportunity Credit (up to $2,500)<br />
– Lifetime Learning Credit (up to $2,000)
<strong>Tax</strong>ing Authorities to Know<br />
• Federal Government = Internal Revenue<br />
Service (IRS)<br />
– Income <strong>Tax</strong><br />
– Employment <strong>Tax</strong><br />
• State Government = Franchise <strong>Tax</strong> Board<br />
(FTB)<br />
– Income <strong>Tax</strong><br />
– Employment <strong>Tax</strong>
Residency<br />
‣There are 3 types of Residency<br />
1. Residency <strong>for</strong> Immigration purposes<br />
2. Residency <strong>for</strong> Tuition purposes<br />
3. Residency <strong>for</strong> <strong>Tax</strong> purposes<br />
‣Determining Residency <strong>for</strong> <strong>Tax</strong> Purposes<br />
‣ The IRS determines residency status with 2<br />
tests:<br />
1. Green Card Test<br />
2. Substantial Presence Test
The Green Card Test<br />
‣ You are a resident <strong>for</strong> tax purposes if you are a Lawful<br />
Permanent Resident of the U.S. at any time during the<br />
year.<br />
‣ You are a Lawful Permanent Resident if:<br />
‣ You have been given the privilege of residing permanently in the<br />
U.S., according to immigration laws<br />
‣ You generally would have this status if you were issued an alien<br />
registration card (Form I-551) a.k.a. a “green card”.<br />
‣ Your residency start date is the first day on which you are<br />
a Lawful Permanent Resident.<br />
‣ You would also have the option of choosing to be treated as a<br />
resident alien <strong>for</strong> the entire year.
The Substantial Presence Test<br />
Method used by the IRS to count the physical presence in<br />
the U.S. each year <strong>for</strong> all non-immigrants.<br />
‣ You must be physically present in the U.S. on at least<br />
– 31 days during the current year, and<br />
– 183 days during the 3 year period that includes the current year and<br />
the 2 years be<strong>for</strong>e that.<br />
– How to calculate days <strong>for</strong> residency:<br />
Current year – 100% of days present<br />
First preceding year – 1/3 of days present<br />
Second preceding year – 1/6 of days present
The Substantial Presence Test<br />
Exemptions from the Substantial Presence Test:<br />
(days are not yet counted toward residency)<br />
‣ F1/J1 Visas (Student)<br />
‣ The first 5 years of U.S. presence are exempt from counting<br />
toward residency <strong>for</strong> tax purposes<br />
‣ You will be considered a non-resident alien during these 5 years<br />
‣ This is a one-time lifetime exemption.<br />
‣ J1 Visas (Exchange Visitors)<br />
‣ Any 2 years of presence (not counting the current year) within a<br />
6 year look back period are exempt from counting toward<br />
residency <strong>for</strong> tax purposes
F1 or J1 Students<br />
Excluding 2012, list each year you have been in<br />
the U.S. If the total number of years is less than 5<br />
years, you are a non-resident <strong>for</strong> tax purposes.<br />
Years Present in the U.S.<br />
2006 – present 90 days<br />
2007 – present 90 days<br />
2011 – present 365 days<br />
2012 – present 365 days<br />
Total number of years present = 4 (Non-resident <strong>for</strong> tax purposes)
J1 Scholars<br />
(non-student category)<br />
For each year below, indicate days present in the U.S. If you were<br />
exempt <strong>for</strong> 2 of the 6 preceding years, then you will no longer be<br />
exempt from counting days toward your residency.<br />
In this example:<br />
‣ The J1 Scholar was exempt in<br />
2 of the 6 preceding years and<br />
there<strong>for</strong>e would no longer be<br />
exempt<br />
‣ The current year would then<br />
be counted toward their<br />
residency<br />
‣ They meet the substantial<br />
presence test (31 days in the<br />
current year and at least 183<br />
days from the last 3 years)<br />
Years Days Present in the U.S.<br />
2007 30 days (you were exempt this year)<br />
2008<br />
2009<br />
2010<br />
2011 30 days (you were exempt this year)<br />
2012 183 days (you are no longer exempt)<br />
Total 3 rd year in U.S. (resident <strong>for</strong> tax purposes)
All Other Visa Holders<br />
(H1, O1, TN, RF, etc.)<br />
Since there is no exemption rule, the Substantial Presence Test<br />
is applied immediately upon arrival to the U.S.<br />
• You must be physically present in the U.S. on at least<br />
– 31 days during the current year, and<br />
– 183 days during the 3 year period that includes the current year and the 2 years<br />
be<strong>for</strong>e that.<br />
Year<br />
Days Present<br />
in the U.S.<br />
% Days counted<br />
2 nd year<br />
be<strong>for</strong>e the<br />
current year<br />
1 st year<br />
be<strong>for</strong>e the<br />
current year<br />
2010 120 0.167<br />
(only 1/6 counts<br />
this year)<br />
2011 120 0.333<br />
(only 1/3 counts<br />
this year)<br />
20<br />
40<br />
Current year 2012 120 1.000<br />
(all of it counts<br />
this year)<br />
120<br />
Total 180 (non-resident <strong>for</strong> 2012)<br />
If the number of days counted is less than 183, you are a non-resident <strong>for</strong> tax purposes.
What is GLACIER?<br />
‣A non-resident alien tax compliance<br />
software system that resides on a secure<br />
server and is accessible via the Internet<br />
‣Maintains data entered by <strong>for</strong>eign national<br />
‣Used to determine tax residency and<br />
tax withholding rates<br />
‣Manages paper <strong>for</strong>ms<br />
‣Creates a <strong>Tax</strong> Summary report with all the<br />
required in<strong>for</strong>mation <strong>for</strong> tax compliance
What is GLACIER Required <strong>for</strong>?<br />
A completed GLACIER record is required<br />
prior to disbursement of payment to a<br />
<strong>for</strong>eign national <strong>for</strong>:<br />
‣<strong>Tax</strong>able Fellowship/Scholarship awards<br />
‣Wages <strong>for</strong> employment<br />
‣Wages <strong>for</strong> guest lecturer<br />
‣Royalties<br />
‣Other payments not exempted by IRS<br />
Code
Where to Submit<br />
GLACIER Paperwork<br />
‣ UCLA is the office of record <strong>for</strong> payments issued by<br />
U.C. Merced<br />
‣ GLACIER is administered by UCLA Payroll <strong>Services</strong><br />
– UCLA Payroll <strong>Services</strong><br />
10920 Wilshire Blvd, Suite 620<br />
Los Angeles, CA 90025<br />
Fax: (310) 794-8751<br />
GLACIER Lead Administrator:<br />
Mike Sattin msattin@finance.ucla.edu (310) 267-5774<br />
GLACIER – Employee <strong>Tax</strong> Treaties:<br />
Heather Kira-Hoeke hhoeke@finance.ucla.edu (310) 794-8707
UC Merced GLACIER Process<br />
1. The dept. requests a GLACIER record be set up by UCLA<br />
Payroll <strong>Services</strong><br />
2. Once the record is set up, you will receive an e-mail from<br />
support@online-tax.net with instructions to access<br />
GLACIER. This e-mail is not SPAM. Please look <strong>for</strong> it in<br />
your e-mail.<br />
3. Access GLACIER and complete your record<br />
4. Print the <strong>for</strong>ms as indicated on the <strong>Tax</strong> Summary<br />
5. Send the <strong>for</strong>ms to UCLA Payroll <strong>Services</strong> (see slide #13)<br />
6. As changes occur, update your GLACIER record, print the<br />
updated <strong>for</strong>ms, and send to UCLA Payroll <strong>Services</strong>.
Sample GLACIER email<br />
Dear Student,<br />
The Internal Revenue Service (IRS), the U.S. government tax authority, requires Regents - University of Cali<strong>for</strong>nia, Los Angeles (UCLA) to collect<br />
in<strong>for</strong>mation from all non-U.S. citizens and non-permanent resident aliens to determine the appropriate rate of tax withholding and reporting <strong>for</strong> any<br />
payments that may be made to such individuals.<br />
You have received this email because you may receive payments from Regents - University of Cali<strong>for</strong>nia, Los Angeles (UCLA). For your convenience,<br />
Regents - University of Cali<strong>for</strong>nia, Los Angeles (UCLA) allows you to provide the required in<strong>for</strong>mation and complete the necessary <strong>for</strong>ms via the Internet<br />
from any web-accessed computer using the GLACIER Online <strong>Tax</strong> Compliance System. The in<strong>for</strong>mation and <strong>for</strong>ms must be provided prior to any payment<br />
so that the correct tax withholding and reporting decisions are made; failure to do so may result in the maximum rate of tax withholding and/or delayed<br />
payment. In<strong>for</strong>mation provided to GLACIER is transmitted and stored securely and will only be used by Regents - University of Cali<strong>for</strong>nia, Los Angeles<br />
(UCLA) <strong>for</strong> purposes of tax withholding and reporting.<br />
You must access GLACIER and provide the requested in<strong>for</strong>mation within 10 days of receiving this message. If you do not provide the requested<br />
in<strong>for</strong>mation within 10 days, the maximum amount of U.S. tax will be withheld from any payments made to you.<br />
To login to GLACIER, follow the steps below:<br />
Click on the following web link: http://www.online-tax.net ; if the link does not automatically open, simply open your Internet Browser (preferably Internet<br />
Explorer) and enter the website address http://www.online-tax.net.<br />
Click on the GLACIER logo to enter the website.<br />
At the login screen, enter your temporary access in<strong>for</strong>mation from below; you will be required to select a new UserID and Password at the time of first<br />
access to GLACIER.<br />
UserID: XXXXXXXX<br />
Password: XXXXXXXX<br />
If you have any questions or need additional in<strong>for</strong>mation about why you have been asked to use GLACIER, please contact me.<br />
Thank you and have a great day.<br />
Regents - University of Cali<strong>for</strong>nia, Los Angeles (UCLA)
GLACIER <strong>Tax</strong> Summary Report<br />
All in<strong>for</strong>mation entered into GLACIER is<br />
summarized on this report and will<br />
automatically determine:<br />
‣ Residency <strong>for</strong> <strong>Tax</strong> purposes<br />
‣ <strong>Tax</strong> Treaty Eligibility<br />
‣ FICA Eligibility<br />
‣ Required Forms and Documents.
Sample <strong>Tax</strong> Summary Report
Federal <strong>Tax</strong> Reporting <strong>for</strong><br />
Fellowship Income<br />
Non-residents with fellowship income may<br />
have part of their income reported to the IRS<br />
on Form 1042-S.<br />
‣The portion of the fellowship that was applied<br />
toward educational expenses (fees, tuition,<br />
etc.) will not be reported on Form 1042-S.
Wages Received<br />
Income paid as wages can be treated in 1 of<br />
3 ways:<br />
‣Excludable<br />
– i.e. Employer paid benefits<br />
‣Exempt due to treaty<br />
– Must submit <strong>for</strong>ms to UCLA Payroll <strong>Services</strong><br />
and qualify <strong>for</strong> treaty<br />
‣<strong>Tax</strong>able
Employment <strong>Tax</strong>es<br />
‣All employees must contribute to FICA unless<br />
exempted by law<br />
‣2 exemptions possible at UC Merced<br />
‣F1/J1 – must be a nonresident <strong>for</strong> tax purposes<br />
and working to further the purpose <strong>for</strong> which the<br />
visa was issued.<br />
‣Student – must be enrolled in a half-time course<br />
load
Federal Income <strong>Tax</strong><br />
‣ Exemption to Federal <strong>Tax</strong>es by tax treaty<br />
– An agreement between the U.S. and another country which<br />
reduces or exempts the individual from tax withholding.<br />
− To be eligible:<br />
− A tax treaty must exist between the U.S. and your resident country<br />
− You must be a nonresident of the U.S.<br />
− Primary purpose of visit and job must meet the requirements listed in<br />
the tax treaty<br />
− such as professor or researcher pay, or amounts received <strong>for</strong><br />
studies by a <strong>for</strong>eign student<br />
− Time and dollar constraints of the tax treaty must be met<br />
− You must have a taxpayer ID# (Social Security # or ITIN)<br />
− Must complete appropriate paperwork (GLACIER documentation)<br />
NOTE: Cali<strong>for</strong>nia does not con<strong>for</strong>m to Federal tax treaty laws
State Income <strong>Tax</strong><br />
‣ Income earned while living and working in<br />
Cali<strong>for</strong>nia is subject to withholding<br />
‣ Income earned outside of Cali<strong>for</strong>nia may also be<br />
subject to withholding if the employee is a<br />
resident of Cali<strong>for</strong>nia<br />
‣ State Income <strong>Tax</strong> Withholding is based on<br />
in<strong>for</strong>mation from the DE-4 withholding <strong>for</strong>m (<strong>for</strong><br />
employees)<br />
– http://www.ucop.edu/financial-accounting/_files/ucw4-<br />
de4.pdf
Year End <strong>Tax</strong> Forms<br />
W-2 Wage and <strong>Tax</strong> Statement<br />
1042-S <strong>Foreign</strong> Person’s U.S. Source Income Subject to Withholding<br />
1098-T Tuition Statement<br />
1099-MISC Miscellaneous Income<br />
1099-INT Interest Income<br />
592-B Cali<strong>for</strong>nia Nonresident Withholding <strong>Tax</strong> Statement
Understanding your W-2<br />
2012
Who Must File?<br />
‣In the U.S., it is the individual’s<br />
responsibility to know what taxes must be<br />
filed with the government<br />
‣Everyone who receives compensation<br />
while living in Cali<strong>for</strong>nia may be required<br />
to file a Cali<strong>for</strong>nia Income <strong>Tax</strong> Return
2012 Federal Filing Requirements<br />
(under age 65)<br />
If your filing status is… File if your gross income<br />
was at least…<br />
Single $9,750<br />
Head of Household $12,500<br />
Qualifying Widow(er) $15,700<br />
Married Filing Jointly $19,500<br />
Married Filing Separately $3,800
2012 Cali<strong>for</strong>nia Filing Requirements<br />
(under age 65)<br />
If your filing status is…<br />
File if your gross<br />
income was at<br />
least…<br />
(if you had no<br />
dependents)<br />
(if you had 1<br />
dependent)<br />
(if you had 2 or<br />
more dependents)<br />
Single $15,440 $26,140 $34,165<br />
Head of Household $15,440 $26,140 $34,165<br />
Qualifying Widow(er) N/A $26,140 $34,165<br />
Married Filing Jointly/RDP $30,881 $41,581 $49,606<br />
Married Filing Separately $30,881 $41,581 $49,606<br />
Dependent of another<br />
person<br />
More than your<br />
standard deduction<br />
More than your<br />
standard deduction<br />
More than your<br />
standard deduction
What tax <strong>for</strong>ms do I need to file?<br />
Federal:<br />
‣ Form 8843 – Statement <strong>for</strong> Exempt Individuals<br />
(Mandatory <strong>for</strong> all nonresidents)<br />
‣ Possibly Form 1040NR or 1040NR-EZ<br />
Cali<strong>for</strong>nia:<br />
‣ Possibly Form 540NR
When and Where to File?<br />
The last day to file your income tax return is April 15 th .<br />
• Individual Federal Return must be mailed to:<br />
Type of Return Refund or No-Pay Payment with Return<br />
1040NR, 1040NR-EZ<br />
Department of Treasury<br />
Internal Revenue Service<br />
Austin, TX 73301-0215<br />
Internal Revenue Service<br />
PO Box 1303<br />
Charlotte, NC 28201-1303<br />
• Individual State (Cali<strong>for</strong>nia) Return must be mailed to:<br />
Type of<br />
Return<br />
Refund or No-Pay<br />
Return<br />
Payment with Return<br />
Other<br />
Correspondence<br />
540NR,<br />
540NR-<br />
EZ<br />
Franchise <strong>Tax</strong> Board<br />
PO Box 942840<br />
Sacramento, CA<br />
94240-0001<br />
Franchise <strong>Tax</strong> Board<br />
PO Box 942867<br />
Sacramento, CA<br />
94267-0001<br />
Franchise <strong>Tax</strong> Board<br />
PO Box 942840<br />
Sacramento, CA<br />
94240-0040
Useful IRS Publications<br />
‣ Pub 515 Withholding of <strong>Tax</strong> on Nonresident Aliens<br />
‣ Pub 519 U.S. <strong>Tax</strong> Guide to Aliens<br />
‣ Pub 901 U.S. <strong>Tax</strong> Treaties<br />
‣ Pub 970 <strong>Tax</strong> Benefits <strong>for</strong> Education
Useful Resources<br />
Telephone Numbers:<br />
Internal Revenue Service (IRS) (800) 829-1040<br />
Franchise <strong>Tax</strong> Board (FTB) (800) 852-5711<br />
Employment Development Dept. (EDD) (800) 795-0193<br />
Social Security Administration (SSA) (888) 632-7069<br />
Websites:<br />
Internal Revenue Service (IRS) http://www.irs.gov/<br />
Franchise <strong>Tax</strong> Board (FTB) http://www.ftb.ca.gov/
Campus Resources<br />
‣ <strong>Tax</strong> <strong>Services</strong> tax@ucmerced.edu (209) 228-4075<br />
‣ Student Business <strong>Services</strong> sbs@ucmerced.edu (209) 228-4114<br />
‣ Graduate Division gradfunding@ucmerced.edu (209) 228-4622<br />
‣ Financial Aid finaid@ucmerced.edu (209) 228-4243<br />
‣ Human Resources hr@ucmerced.edu (209) 228-8586<br />
‣ Accounting <strong>Services</strong> accounting@ucmerced.edu<br />
‣ Contracts and Grants Accounting cga@ucmerced.edu (209) 222-8043<br />
‣ International Affairs Office international@ucmerced.edu (209) 228-4722<br />
‣ Payroll <strong>Services</strong> payroll@ucmerced.edu (209) 228-2729
Comments or Suggestions<br />
Please submit your comments and/or<br />
suggestions to:<br />
ksamran2@ucmerced.edu