tax info for foreign nationals february 24, 2014 prepared by: kiran samran manager of tax services...

Tax Info for Foreign NationalsTax Info for Foreign NationalsFebruary 24, 2014February 24, 2014

Prepared by:Prepared by:

Kiran SamranKiran Samran

Manager of Tax ServicesManager of Tax Services

1715 Canal Street (Mondo Building)1715 Canal Street (Mondo Building)

Merced, CA 95340Merced, CA 95340

AgendaAgendaTax UpdatesResidency for tax purposesGLACIERIncome and Withholding at U.C. MercedTax ReportingResources

Tax UpdateTax Update

Delayed filing (Beginning Jan. 31)– American Opportunity Credit (up to $2,500)– Lifetime Learning Credit (up to $2,000)

Taxing Authorities to KnowTaxing Authorities to Know

• Federal Government = Internal Revenue Service (IRS)– Income Tax– Employment Tax

• State Government = Franchise Tax Board (FTB)– Income Tax– Employment Tax

ResidencyResidencyThere are 3 types of Residency

1. Residency for Immigration purposes2. Residency for Tuition purposes3. Residency for Tax purposes

Determining Residency for Tax Purposes The IRS determines residency status with 2

tests:1. Green Card Test2. Substantial Presence Test

The Green Card TestThe Green Card Test

You are a resident for tax purposes if you are a Lawful Permanent Resident of the U.S. at any time during the year.

You are a Lawful Permanent Resident if: You have been given the privilege of residing permanently in the

U.S., according to immigration laws You generally would have this status if you were issued an alien

registration card (Form I-551) a.k.a. a “green card”.

Your residency start date is the first day on which you are a Lawful Permanent Resident.

You would also have the option of choosing to be treated as a

resident alien for the entire year.

The Substantial Presence TestThe Substantial Presence Test

Method used by the IRS to count the physical presence in the U.S. each year for all non-immigrants.

You must be physically present in the U.S. on at least– 31 days during the current year, and

– 183 days during the 3 year period that includes the current year and the 2 years before that.

– How to calculate days for residency: Current year – 100% of days present First preceding year – 1/3 of days present Second preceding year – 1/6 of days present

The Substantial Presence TestThe Substantial Presence Test

Exemptions from the Substantial Presence Test:

(days are not yet counted toward residency)

F1/J1 Visas (Student) The first 5 years of U.S. presence are exempt from counting

toward residency for tax purposes You will be considered a non-resident alien during these 5 years This is a one-time lifetime exemption.

J1 Visas (Exchange Visitors) Any 2 years of presence (not counting the current year) within a 6

year look back period are exempt from counting toward residency for tax purposes

F1 or J1 StudentsF1 or J1 Students

Excluding 2013, list each year you have been in the U.S. If the total number of years is less than 5 years, you are a non-resident for tax purposes.

Years Present in the U.S.

2010 – present 90 days

2011 – present 90 days

2012 – present 365 days

2013 – present 365 days

Total number of years present = 4 (Non-resident for tax purposes)

J1 Scholars J1 Scholars (non-student category)(non-student category)

For each year below, indicate days present in the U.S. If you were exempt for 2 of the 6 preceding years, then you will no longer be exempt from counting days toward your residency.

Years Days Present in the U.S.

2008 30 days (you were exempt this year)

2009

2010

2011

2012 30 days (you were exempt this year)

2013 183 days (you are no longer exempt)

Total 3rd year in U.S. (resident for tax purposes)

In this example: The J1 Scholar was exempt in 2 of the 6 preceding years and therefore would no longer be exempt The current year would then be counted toward their residency They meet the substantial presence test (31 days in the current year and at least 183 days from the last 3 years)

All Other Visa HoldersAll Other Visa Holders(H1, O1, TN, RF, etc.)(H1, O1, TN, RF, etc.)

Since there is no exemption rule, the Substantial Presence Test is applied immediately upon arrival to the U.S.•You must be physically present in the U.S. on at least

– 31 days during the current year, and– 183 days during the 3 year period that includes the current year and the 2 years

before that.

Year Days Present in the U.S.

% Days counted

2nd year before the current year

2011 120 0.167 (only 1/6 counts this year)

20

1st year before the current year

2012 120 0.333(only 1/3 counts this year)

40

Current year 2013 120 1.000(all of it counts this year)

120

Total 180 (non-resident for 2013)

If the number of days counted is less than 183, you are a non-resident for tax purposes.

What is GLACIER?What is GLACIER?

A non-resident alien tax compliance software system that resides on a secure server and is accessible via the Internet

Maintains data entered by foreign nationalUsed to determine tax residency and

tax withholding ratesManages paper forms

Creates a Tax Summary report with all the required information for tax compliance

What is GLACIER Required for?What is GLACIER Required for?

A completed GLACIER record is required prior to disbursement of payment to a foreign national for:Taxable Fellowship/Scholarship awardsWages for employmentWages for guest lecturerRoyaltiesOther payments not exempted by IRS Code

Where to Submit Where to Submit GLACIER PaperworkGLACIER Paperwork

UCLA is the office of record for payments issued by U.C. Merced

GLACIER is administered by UCLA Payroll Services– UCLA Payroll Services10920 Wilshire Blvd, Suite 620Los Angeles, CA 90025Fax: (310) 794-8751

GLACIER Lead Administrator:Mike Sattin msattin@finance.ucla.edu (310) 267-5774

GLACIER – Employee Tax Treaties:Heather Kira-Hoeke hhoeke@finance.ucla.edu (310) 794-8707

UC Merced GLACIER Process UC Merced GLACIER Process

1. The dept. requests a GLACIER record be set up by UCLA Payroll Services

2. Once the record is set up, you will receive an e-mail from support@online-tax.net with instructions to access GLACIER. This e-mail is not SPAM. Please look for it in your e-mail.

3. Access GLACIER and complete your record4. Print the forms as indicated on the Tax Summary5. Send the forms to UCLA Payroll Services (see slide #13)6. As changes occur, update your GLACIER record, print the

updated forms, and send to UCLA Payroll Services.

Sample GLACIER emailSample GLACIER emailDear Student,

The Internal Revenue Service (IRS), the U.S. government tax authority, requires Regents - University of California, Los Angeles (UCLA) to collect information from all non-U.S. citizens and non-permanent resident aliens to determine the appropriate rate of tax withholding and reporting for any payments that may be made to such individuals.

You have received this email because you may receive payments from Regents - University of California, Los Angeles (UCLA). For your convenience, Regents - University of California, Los Angeles (UCLA) allows you to provide the required information and complete the necessary forms via the Internet from any web-accessed computer using the GLACIER Online Tax Compliance System. The information and forms must be provided prior to any payment 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 payment. Information provided to GLACIER is transmitted and stored securely and will only be used by Regents - University of California, Los Angeles (UCLA) for purposes of tax withholding and reporting.

You must access GLACIER and provide the requested information within 10 days of receiving this message. If you do not provide the requested information within 10 days, the maximum amount of U.S. tax will be withheld from any payments made to you.

To login to GLACIER, follow the steps below:

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 Explorer) and enter the website address http://www.online-tax.net.

Click on the GLACIER logo to enter the website.

At the login screen, enter your temporary access information from below; you will be required to select a new UserID and Password at the time of first access to GLACIER.

UserID: XXXXXXXX

Password: XXXXXXXX

If you have any questions or need additional information about why you have been asked to use GLACIER, please contact me.

Thank you and have a great day.

Regents - University of California, Los Angeles (UCLA)

GLACIER Tax Summary ReportGLACIER Tax Summary Report

All information entered into GLACIER is summarized on this report and will automatically determine:Residency for Tax purposesTax Treaty EligibilityFICA EligibilityRequired Forms and Documents.

Sample Tax Summary ReportSample Tax Summary Report

Federal Tax Reporting for Federal Tax Reporting for Fellowship IncomeFellowship Income

Non-residents with fellowship income may have part of their income reported to the IRS on Form 1042-S.

The portion of the fellowship that was applied toward educational expenses (fees, tuition, etc.) will not be reported on Form 1042-S.

Wages ReceivedWages Received

Income paid as wages can be treated in 1 of 3 ways:Excludable

– i.e. Employer paid benefits

Exempt due to treaty– Must submit forms to UCLA Payroll Services

and qualify for treaty

Taxable

Employment TaxesEmployment Taxes

All employees must contribute to FICA unless exempted by law

2 exemptions possible at UC MercedF1/J1 – must be a nonresident for tax purposes

and working to further the purpose for which the visa was issued.

Student – must be enrolled in a half-time course load

Federal Income TaxFederal Income Tax Exemption to Federal Taxes by tax treaty

– An agreement between the U.S. and another country which reduces or exempts the individual from tax withholding.

− To be eligible:− A tax treaty must exist between the U.S. and your resident country− You must be a nonresident of the U.S.− Primary purpose of visit and job must meet the requirements listed in

the tax treaty− such as professor or researcher pay, or amounts received for

studies by a foreign student− Time and dollar constraints of the tax treaty must be met− You must have a taxpayer ID# (Social Security # or ITIN)− Must complete appropriate paperwork (GLACIER documentation)

NOTE: California does not conform to Federal tax treaty laws

State Income TaxState Income Tax

Income earned while living and working in California is subject to withholding

Income earned outside of California may also be subject to withholding if the employee is a resident of California

State Income Tax Withholding is based on information from the DE-4 withholding form (for employees)– http://www.ucop.edu/financial-accounting/_files/ucw4-

de4.pdf

Year End Tax FormsYear End Tax Forms

W-2 Wage and Tax Statement

1042-S Foreign Person’s U.S. Source Income Subject to Withholding

1098-T Tuition Statement

1099-MISC Miscellaneous Income

1099-INT Interest Income

592-B California Nonresident Withholding Tax Statement

Understanding your W-2Understanding your W-2

2013

Who Must File?Who Must File?

In the U.S., it is the individual’s responsibility to know what taxes must be filed with the government

Everyone who receives compensation while living in California may be required to file a California Income Tax Return

2013 Federal Filing Requirements2013 Federal Filing Requirements(under age 65)(under age 65)

If your filing status is… File if your gross income was at least…

Single $10,000

Head of Household $12,850

Qualifying Widow(er) $16,100

Married Filing Jointly $20,000

Married Filing Separately $3,900

2013 California Filing Requirements2013 California Filing Requirements(under age 65)(under age 65)

If your filing status is… File if your gross income was at least…

(if you had no dependents)

(if you had 1 dependent)

(if you had 2 or more dependents)

Single $15,702 $26,569 $34,719

Head of Household $15,702 $26,569 $34,719

Qualifying Widow(er) N/A $26,569 $34,719

Married Filing Jointly/RDP $31,406 $42,273 $50,423

Married Filing Separately $31,406 $42,273 $50,423

Dependent of another person

More than your standard deduction

More than your standard deduction

More than your standard deduction

What tax forms do I need to file?What tax forms do I need to file?

Federal:Form 8843 – Statement for Exempt Individuals (Mandatory for all nonresidents)

Possibly Form 1040NR or 1040NR-EZ

California:Possibly Form 540NR

When and Where to File?When and Where to File?The last day to file your income tax return is April 15th.

•Individual Federal Return must be mailed to:

•Individual State (California) Return must be mailed to:

Type of Return

Refund or No-Pay Return

Payment with Return Other Correspondence

540NR, 540NR-EZ

Franchise Tax BoardPO Box 942840Sacramento, CA94240-0001

Franchise Tax BoardPO Box 942867Sacramento, CA94267-0001

Franchise Tax BoardPO Box 942840Sacramento, CA94240-0040

Type of Return Refund or No-Pay Payment with Return

1040NR, 1040NR-EZ Department of TreasuryInternal Revenue ServiceAustin, TX 73301-0215

Internal Revenue ServicePO Box 1303Charlotte, NC 28201-1303

Useful IRS PublicationsUseful IRS Publications

Pub 515 Withholding of Tax on Nonresident Aliens

Pub 519 U.S. Tax Guide to Aliens

Pub 901 U.S. Tax Treaties

Pub 970 Tax Benefits for Education

Useful ResourcesUseful Resources

Telephone Numbers:

Internal Revenue Service (IRS) (800) 829-1040

Franchise Tax Board (FTB) (800) 852-5711

Employment Development Dept. (EDD) (800) 795-0193

Social Security Administration (SSA) (888) 632-7069

Websites:

Internal Revenue Service (IRS) http://www.irs.gov/

Franchise Tax Board (FTB) http://www.ftb.ca.gov/

Campus ResourcesCampus Resources

Tax Services tax@ucmerced.edu (209) 228-4075 Student Business Services sbs@ucmerced.edu (209) 228-4114 Graduate Division gradfunding@ucmerced.edu (209) 228-4622 Financial Aid finaid@ucmerced.edu (209) 228-4243 Human Resources hr@ucmerced.edu (209) 228-8586 Accounting Services accounting@ucmerced.edu Contracts and Grants Accounting cga@ucmerced.edu (209) 222-8043 International Affairs Office international@ucmerced.edu (209) 228-4722 Payroll Services payroll@ucmerced.edu (209) 228-2729

Comments or SuggestionsComments or Suggestions

Please submit your comments and/or suggestions to:

ksamran2@ucmerced.edu