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NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager.

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Presentation on theme: "NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager."— Presentation transcript:

1 NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

2 Did You Know... Maryland is ranked 11 th state with most foreign students ,43912,887 (Open Doors Report, 2006 Fast Facts, Institute of International Education, retrieved 10/22/07 from

3 NRA Myths A one-time process –Identify person & everything is done It’s between the individual & IRS –Underwithholding reconciled through tax return Some people are too “important” –Can’t subject them to the process We have few foreign students & scholars –Few NRAs means will never be audited NRA Office likes to be referred to as “N-Rat”

4 NRA Facts NRA population is an ever-changing group –Requires constant management Withholding agent responsible for NRA tax withholding & reporting (not individual) –Agent incurs back tax withholding fees plus penalties & fines –IRS monitors the following: Inconsistent tax reporting Website information (events, speakers) Omission of Taxpayer ID # NRA* does not like others using this acronym –Might want to say Nonresident Alien Tax *National Rifle Association

5 NRA Scope NRA TAX AUDITS (Federal & State) Risk management TAXPAYER ID # (Social Security Agency/ITIN Unit) SSN or ITIN IMMIGRATION (Dept. of Homeland Security & ICE) Legal Work Authorization I-9 PROCESS (Department of Labor) Within three days of hire TAX ANALYSIS/MONITOR (Internal Revenue Service) All payments TAX TREATIES Monitor limits & Annual renewal TAX WITHHOLDING/REPORTING Federal, FICA, State Laws FAIR LABOR STANDARDS ACT Pay for work performed

6 IRS Tax Categories* 1 US Citizen 2 Permanent Resident Alien 3 Resident Alien for Tax Purposes (RA) 4 Nonresident Alien for Tax Purposes (NRA) Individual’s choice Worldwide income taxed NRA withholding formula Not individual choice Only US income taxed *Terms are all IRS categories and not immigration definitions

7 IRS Income Types & Codes Dependent Compensation – Employee (17, 18, 19) –Service/work required –Includes wages, salary, travel payments Independent Compensation - Non-employee (16) –Service/work required –Includes consulting fees, guest speaker fees, honoraria, travel payments Scholarships – Students (15) –No service or work required and may include independent educational activity –Includes tuition, room and board, stipend or living allowance, travel payment, books/supplies Royalties (12) –Passive income Miscellaneous (50) –No service required –Includes prizes and awards

8 IRS Required NRA Withholding Employee - Single, 1, NRA* –NRA means that agents add a “non-cash” amount to total of wages paid Total wages earned = $200 (Bi-weekly period) Add $102 (IRS Publication 15, p. 14) Withhold tax at $302 amount –Amounts differ based on type of payroll period Independent Compensation – 30%* Scholarships – 14%* *Unless exempt by tax treaty

9 TU NRA Tax Systems Glacier Software (NRA Tax Office) –Tax analysis, NRA monitoring, tax treaty limits PeopleSoft (Payroll & Bursar’s Office) –Tax status, tax withholding, payroll earnings Central Payroll Bureau –POSC/payroll reports, tax reporting, SSN verification

10 How to Identify Tax Category US Citizen Permanent Resident Alien *Must ask question consistently to everyone Question Are you a US Citizen or Permanent Resident Alien?* Yes No Tax Analysis NRA or RA Nonresident Alien for Tax Purposes (NRA) Withholding Agent Responsible Individual Responsible Immigration Status Resident Alien for Tax Purposes

11 When to Identify Tax Category Employees –Question part of I-9 process (Human Resources) Complete Tax Residency Status Form –US Citizen –Permanent Resident Alien –N = Not indicated (Other) –If N, go to NRA Tax Office for tax analysis Non-employees –Question on all payment forms (Accounts Payable) –If answered no, then paperwork sent to NRA Tax Office Non-qualified Scholarships –Report 2x year (Bursar’s Office) requested by NRA Office

12 PeopleSoft – Coding Tax Status Tax Status Codes 1 US Citizen 3 Permanent Resident Alien 5 Nonresident Alien for Tax Purposes 6 Resident Alien for Tax Purposes N Not indicated Blank Enter in Citizenship Status Field Path = Home > Build Community > Identification Data > Use > Citizenship/Passport Data

13 PeopleSoft – Reports Run bi-weekly Payroll report –Monitor employees Tax status of N, 5, 6 Tax Treaty Limits FICA Other taxes/issues Social Security Number reports –SSN vs. ITINS –No number Identify scholarship recipients –N, 5, & 6 –Tuition, fees, scholarships, book grants

14 University Internal Audits Maureen Higgins, CPA, MS Taxation Internal Audit University System of Maryland

15 Internal Audit Office Conducts financial, operational, compliance, investigative, information systems, and follow-up reviews of the USM's institutions to ensure they are operating effectively, efficiently, and in accordance with applicable policies, standards, regulations, and laws. Provides services to the Regents, the Chancellor and management to assist them in meeting their legal, fiduciary, and management responsibilities.

16 Internal Audit Function Audit Process: Assessing Risk Selecting the Area to Audit Conducting a Preliminary Survey Evaluating the Control Environment Performing the Audit Field Work Issuing an Audit Report addressing Audit Issues and Recommendations

17 Common NRA Audit Areas Nonresident Alien: Employees Student Workers Independent Contractors Grants, Scholarships & Fellowships

18 Common NRA Audit Areas Determination of Tax Status “NRA” Accuracy of NRA Withholding Tax Timeliness of Tax Deposits Documentation of Income Tax Treaty Benefits FICA Withholding

19 Internal Controls Documentation & Records Retention Policies & Procedures Software Assistance or Manual Processes –Determining Tax Residency –Monitoring Treaty Benefits –Current Laws –Reporting necessary IRS Forms –Monitoring Immigration Changes Reconciliations & Reviews Training Personnel Communication between Departments

20 Anticipate IRS Audits Statute of Limitations & Records Retention Immigration and Tax Residency Documentation Accuracy of Form W-4 Form 1042-S Supporting Documentation Search for Unreported Transactions Treaty Eligibility Support –Form W-8BEN –Form 8233

21 IRS Audits for NRA Tax Dave Foreman, Tax Manager Office of the Comptroller University System of Maryland

22 Comptroller’s Office Prepare financial statements & tax returns Coordinate audit process of financials/grants Facilitate IRS audits within USM system Assess tax liability Negotiate agreements with IRS Assist in system-wide policy setting in financial matters

23 IRS Audit – CY 2001 The following payment types were reviewed: –Employees –Independent contractors –Scholarships/fellowships/grants

24 IRS Audits – Information Collection CY 2001 following requested for respective payment type: –Immigration status –Copies of Form IAP-66/DS-2019 –Date of entry into US –Service contracts –Copies of Forms 1042-S and W-2 issued –Copies of Tax Treaty Forms –Copies of Form W-4 –Copies of Form W-9 –Date of payment, check or voucher numbers & payment amount –Scholarship analysis documentation

25 IRS Findings – CY 2001 Rules lacking full compliance, especially employees Need to: –Identify all aliens on Payroll –Document foreign origin & work authorization –Determine NRA vs. RA

26 IRS Findings – CY 2001 continued Follow withholding rules for NRAs –NRA cannot write “Exempt” on W-4 (federal part) –“Single” filing status only allowed –May claim only 1 person exemption on W-4 (unless treaty exempt) –Need to back out standard deduction benefit (NRA) –Treaty benefit requires Form 8233 sent to IRS/5 days –If cannot secure W-4 as above, must withhold as “Single”, zero exemptions –Report treaty exempt wages on 1042-S; also on W-2

27 USM Future Objectives Assess needs of USM institutions for NRA Tax support Develop policies & procedures on USM level & for Internal Audit purposes Create training tools & reference materials (manual) for institutions to use

28 QUESTIONS?


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