nra tax & peoplesoft nra tax & peoplesoft mary fortier, nra tax manager

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

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

NRA Tax & PeopleSoftNRA Tax & PeopleSoftMary Fortier, NRA Tax Manager

Page 2: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

Did You Know . . .Did You Know . . .• Maryland is ranked 11th state with most foreign

students

2004-05 2005-0613,439 12,887

(Open Doors Report, 2006 Fast Facts, Institute of International Education, retrieved 10/22/07 from http://opendoors.iienetwork.org/file_depot/0-10000000/0-10000/3390/folder/50084/Open+Doors+2006_FastFacts_FINAL.pdf)

Page 3: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

NRA MythsNRA 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”

Page 4: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

NRA FactsNRA 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

Page 5: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

NRA ScopeNRA 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 TREATIESMonitor limits & Annual renewal

TAX WITHHOLDING/REPORTINGFederal, FICA, State Laws

FAIR LABOR STANDARDS ACT

Pay for work performed

Page 6: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

IRS Tax Categories*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

Page 7: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

IRS Income Types & CodesIRS 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

Page 8: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

IRS Required NRA WithholdingIRS 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

Page 9: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

TU NRA Tax SystemsTU 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

Page 10: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

How to Identify Tax CategoryHow 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 AnalysisNRA or RA

Nonresident Alien for Tax Purposes (NRA)

Withholding Agent Responsible

Individual Responsible

Immigration Status

Resident Alien for Tax Purposes

Page 11: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

When to Identify Tax CategoryWhen 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

Page 12: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

PeopleSoft – Coding Tax StatusPeopleSoft – 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 FieldPath = Home > Build Community > Identification Data> Use > Citizenship/Passport Data

Page 13: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

PeopleSoft – ReportsPeopleSoft – 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

Page 14: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

University Internal Audits

Maureen Higgins, CPA, MS TaxationInternal Audit

University System of Maryland

Page 15: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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.

Page 16: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

Internal Audit FunctionAudit 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

Page 17: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

Common NRA Audit Areas

Nonresident Alien:

• Employees• Student Workers• Independent Contractors• Grants, Scholarships & Fellowships

Page 18: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 19: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 20: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 21: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

IRS Audits for NRA Tax

Dave Foreman, Tax ManagerOffice of the Comptroller

University System of Maryland

Page 22: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 23: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

IRS Audit – CY 2001

• The following payment types were reviewed:

– Employees– Independent contractors– Scholarships/fellowships/grants

Page 24: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 25: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 26: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 27: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

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

Page 28: NRA Tax & PeopleSoft NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

QUESTIONS?QUESTIONS?