NONRESIDENT ALIEN TAX POLICY
The University of Alabama
Tuscaloosa, Alabama
June 1, 2001
Table of Contents
I. GENERAL
SECTION 1.1 Scope of Policy
SECTION 1.2 U.S. Source Payment
SECTION 1.3 Definition of Student
SECTION 1.4 Definition of Postdoctoral Fellows and Visiting Scholars
SECTION 1.5 Definition of Nonresident Alien and Resident Alien
SECTION 1.6 Definition of Foreign National
SECTION 1.7 Amendment of Policy
II.
CLASSIFICATIONS OF PAYMENTS
SECTION 2.1 Employee Compensation Payments
A. Federal Income Tax
B. State Income Tax
C. FICA Tax
SECTION 2.2 Scholarship/Fellowship Payments
A. Federal Income Tax
B. State Income Tax
C. FICA Tax
SECTION 2.3 Independent Contractor Payments
A. Federal Income Tax
B. State Income Tax
C.
FICA Tax
III. FORMS AND PROCEDURES
Immigration
SECTION 3.1 INS Form I-94 Arrival/Departure Record
SECTION 3.2 INS Form I-9 Employment Eligibility Verification
SECTION 3.3 USIA Form IAP-66P Certificate of Eligibility for Exchange Visitor
SECTION 3.4 INS Form I-20P Certificate of Eligibility for Nonimmigrant Student
Tax Identification Numbers
SECTION 3.5 Form SS-5 Social Security Administration Application
SECTION 3.6 IRS Form W-7 Application for IRS Individual Taxpayer Identification Number
UA Internal Use
SECTION 3.7 UA Foreign National Information Form
SECTION 3.8 UA Nonresident Alien Student Tax Status Determination Form
Federal Tax
SECTION 3.9 IRS Form 8233 Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual
SECTION 3.10 IRS Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding
SECTION 3.11 IRS Form W-9 Request for Taxpayer Identification Number and Certification
SECTION 3.12 IRS Form W-4 Employee’s Withholding Allowance Certificate
SECTION 3.13 IRS Form 8843 Statement for Exempt Individuals and Individuals with a Medical Condition
SECITON 3.14 IRS Form 8840 Closer Connection Exception Statement
State Tax
SECITON 3.15 AL DOR Form A-4 Employee’s Withholding Exemption Certificate
SECTION 3.16 AL DOR Form A-4E Employee’s Withholding Exemption Certificate
Year-End Reporting
SECTION 3.17 IRS Form 1042-S Foreign Person’s U.S. Source Income Subject to Withholding
SECTION 3.18 IRS Form 1042 Annual withholding Tax Return for U.S. Source Income of Foreign Persons
SECTION 3.19 IRS Form W-2 Wage and Tax Statement
IV. IMPLEMENTATION AND COMPLIANCE RESPONSIBILITIES
SECTION 4.1 UA Departments and Administrative Offices
SECTION 4.2 Nonresident Alien Tax Accountant
A. Tax Analysis
B. Year End Tax Reporting (1042-S)
C. Compliance Program
SECTION 4.3 Capstone International Services (CIS)
SECTION 4.4 Payroll Office
SECTION 4.5 Office of Student Receivables
SECTION 4.6 Tax Manager
APPENDICES
APPENDIX ONE U.S.
Tax Residency Tests
APPENDIX TWO
Income Tax Treaties in Force
APPENDIX THREE
Social Security Totalization Agreements
I. GENERAL
SECTION 1.1 – Scope of Policy
Effective as of June 1, 2001, this Nonresident Alien Tax Policy (referred to herein as the “Policy”) applies to “U.S. source payments” disbursed by The University of Alabama, Tuscaloosa (referred to herein as “UA”) to nonresident aliens who are students; employees, including postdoctoral/postgraduate fellows and visiting scholars; scholarship/fellowship recipients; and independent contractors.
SECTION 1.2 – U.S. Source
Payment
Unlike
U.S. citizens and resident aliens who are taxed on their worldwide income,
nonresident aliens are only taxed on income they receive from U.S. sources.
Nonresident aliens do not have to pay U.S. income tax on income
they receive from countries outside the U.S.
This income is referred to as “foreign source.”
The Nonresident
Alien Tax Accountant (referred to herein as “NRA Tax Accountant”) is responsible
for determining whether a payment is a “U.S. source” or “foreign source”
payment.
Payments
of employee compensation (including cash employee prizes and awards) and
payments to independent contractors are generally sourced in the country
where the service is performed.
Scholarship/fellowship payments generally are sourced in the country where the payer is located, regardless of the location of an agent who disburses payments for the payer.
SECTION 1.3 – Definition of Student
For purposes of this Policy,
a student is an individual who, either at
the undergraduate or graduates level, is enrolled in and regularly attending
classes and/or registered for research, thesis, or dissertation requirements.
The Payroll Office, with the assistance of other UA Department(s)
and Administrative Office(s), as necessary, shall be responsible for monitoring
the student status of individuals being paid as student employees.
An individual’s student status shall continue during the break between the conclusion of one academic term and the commencement of the immediately following academic term, unless UA’s student record system indicates the individual will neither be enrolled in and regularly attending classes nor registered for research, thesis, or dissertation requirements during the academic term that commences immediately after a break.
SECTION 1.4 – Definition of Postdoctoral Fellows and Visiting Scholars
For purposes of this Policy,
postdoctoral fellows are foreign nationals
who have completed the course, research, thesis, and/or dissertation requirements
for obtaining a postgraduate degree at UA or another educational institution.
UA hires these individuals as temporary employees.
At the same time, these individuals are gaining more experience
and training.
For purposes of this Policy, visiting scholars are foreign nationals who are experienced in their field of study and are hired by UA as temporary employees. They may be classified as Professors, Teachers, Instructors, Researchers, Visiting Scientists, etc.
SECTION 1.5 – Definition of Nonresident Alien and Resident Alien
For purposes
of this Policy, a nonresident alien
is a person who is not a U.S. citizen and who does NOT meet either the
Green Card Test or the Substantial Presence Test (see APPENDIX ONE).
For purposes
of this Policy, a resident alien
is a person who is not an U.S. citizen and who meets either the Green
Card Test or the Substantial Presence Test (see APPENDIX ONE). A resident alien generally is subject to the same tax withholding
and payment rules as a U.S. citizen; however, the NRA Tax Accountant is
responsible for determining whether the tax withholding and payment rules
applicable to a resident alien differ from the rules applicable to a U.S.
citizen.
A foreign
national who meets the Substantial Presence Test (and does not meet the
Green Card Test) may retain his or her nonresident alien status. The individual must demonstrate to the satisfaction
of the Internal Revenue Service (referred to herein as “IRS”) that he
or she has met the “Closer Connection Test” by filing Form 8840 Closer Connection Exception Statement
for Aliens (see SECTION 3.14).
SECTION 1.6 – Definition of Foreign National
For purposes
of this Policy, a foreign national
is a person who owes his permanent allegiance to a country other than
the U.S. This usually means that
the person is a citizen of another country.
A foreign national is presumed to be a nonresident alien unless
he/she meets either the Green Card Test or the Substantial Presence Test.
SECTION 1.7 – Amendment of Policy
Changes
in tax laws, the legal interpretation of tax laws, positions taken by
the IRS or other tax authorities or in UA procedure may require this Policy
to be amended.
II. CLASSIFICATIONS
OF PAYMENTS
This Policy
covers three classes of U.S. source payments to nonresident aliens:
·
Employee compensation payments,
·
Scholarship/fellowship payments,
and
·
Independent contractor payments.
SECTION 2.1 – Employee Compensation Payments
Employees are individuals who perform services subject
to the direction and control of UA, both as to what shall be done and
how it shall be done.
Employee compensation is paid by the Payroll Office to (or on
behalf of) an individual who performs services for UA.
Employee
compensation may only be paid to a nonresident alien who has been granted
an appropriate employment authorization and immigration status by the
Immigration and Naturalization Service (referred to herein as “INS”) and
who has a valid social security number.
The work authorization status of a nonresident alien shall be approved
by Capstone International Services (referred to herein as “CIS”).
Payments
to postdoctoral fellows and visiting scholars
are classified as employee compensation because work (service) is
performed in exchange for compensation.
Assistantships, which include graduate student, research
and teaching assistantships, are a form of financial assistance provided
to students to aid them in pursuing a course of study. Assistantship payments are designated as employee
compensation because work (service) is performed in exchange for compensation.
Employee prizes and awards include cash payments to employees based
on past accomplishments or activities as an employee, and such cash payments
are included in employee compensation.
A.
Federal Income Tax
In
general, federal income tax shall be withheld from all employee compensation
payments made to a nonresident alien, unless the payment is exempt from
withholding under federal law, which includes a tax treaty between the
U.S. and the nonresident alien’s country of tax residence. For a list of countries with which the U.S. has entered income tax
treaty agreements, see APPENDIX TWO.
CAUTION: The fact that an individual’s
country of tax residence is listed does not automatically mean that payments to the individual
will be exempt from tax. Exemption
will depend upon numerous factors, including: the specific provisions
of each treaty, the individual’s length of stay in the U.S., the type
of payment made, and whether the individual has met with the NRA Tax Accountant
to complete the appropriate forms.
Subject
to the provisions of applicable income tax treaties, the Payroll Office
shall withhold federal income tax at the applicable graduated tax rate
from employee compensation payments.
Nonresident aliens may claim a personal withholding allowance by
completing IRS Form W-4 Employee’s Withholding
Allowance Certificate (see SECTION 3.12) and submitting it to the
NRA Tax Accountant.
To
apply for a withholding exemption on employee compensation based on a
tax treaty, a nonresident alien must contact the NRA Tax Accountant to
complete IRS Form 8233 Exemption From Withholding
on Compensation for Independent (and Certain Dependent) Personal Services
of a Nonresident Alien Individual (see SECTION 3.9). Tax treaty
benefits will not be granted without a valid social security number.
If
the individual does not qualify for a tax treaty exemption, the NRA Tax
Accountant will make sure the individual is being taxed at the appropriate
tax rate.
B.
State Income Tax
Nonresident
aliens are subject to tax on all income received within, or for services
performed in, Alabama.
Subject
to applicable withholding exemptions, the Payroll Office shall withhold
State of Alabama Income Tax (referred to herein as “State Income Tax”)
at the applicable rate from employee compensation.
The following rules shall apply with regard to withholding exemptions:
1.
All employees must submit
either a completed State Income Tax Form A-4
or a completed State Income Tax Form
A-4E (see SECTIONS 3.15 and 3.16) to the NRA Tax Accountant, who will
forward the form to the Payroll Office.
2.
The Alabama Department of
Revenue does not currently recognize withholding exemptions based on tax
treaties; therefore, State Income Tax withholding cannot be adjusted based
on the provisions of such treaties.
C. Federal
Insurance Contributions Act (FICA) Tax
FICA
tax (the Old-Age, Survivors and Disability Insurance Tax and the Medicare
Tax) which is commonly referred to as the “Social Security Tax,” is imposed
in equal parts on both the employee and employer with respect to wages
paid to individuals working in the U.S.
Employment generally means any service, of whatever nature, performed
by an employee within the U.S. for an employer, regardless of the citizenship
or residence of the employee.
The
Payroll Office shall withhold the employee portion of the FICA tax from
all payments of employee compensation and pay the corresponding employer
portion of the FICA tax. However,
a nonresident alien employee and UA may be entitled to withholding/payment
exemption(s) from the FICA tax based upon the employee’s student status,
employee’s immigration status, a tax treaty, or a “Social Security Totalization
Agreement.”
1.
FICA Exemption Based Upon Student Status
An
employee and UA may be exempt from the employee and employer portions
of FICA tax based upon the student status of the employee. The student is exempt from FICA tax under Section 3121(b)(10) of
the Internal Revenue Code, if the student works for the school at which
he/she is enrolled and regularly attends classes.
In order to qualify for this exemption, the student must be enrolled
in at least half-time status. Half
time is defined as 6 hours for undergraduate and 4.5 hours for graduate
school. The Payroll Office monitors student status
every time the payroll is ran, and charges FICA tax as appropriate.
2.
FICA Exemption Based Upon Immigration Status
An
employee and UA may be exempt from the employee and employer portions
of FICA tax based upon the employee’s immigration status. To qualify for this exemption, the employee must be temporarily
present in the U.S. as a nonresident alien in F-1, J-1, M-1, or Q-1 immigration
status, and must perform service
in accordance with the primary purpose of their visa. If these criteria are met, the nonresident alien is exempt from
FICA tax under Section 3121(b)(19) of the Internal Revenue Code. The NRA Tax Accountant shall inform the Payroll
Office not to withhold FICA tax.
The
NRA Tax Accountant will apply the Substantial Presence Test (see APPENDIX
ONE) to visa holders in accordance with federal regulations, which include
the following:
(a)
Students
A
student who is in F, J, M, or Q immigration status is generally exempt
from counting days of presence as a student for purposes of the Substantial
Presence Test, provided that the student has not been exempt from counting
days of U.S. presence for any part of more than five (5) calendar years
due to student or non-student immigration status.
(b)
Teachers and Trainees (non-students)
A
teacher or trainee, other than a student, who is in J or Q immigration
status, is generally exempt from counting days of presence for purposes
of the Substantial Presence Test. The
teacher or trainee must NOT have been exempt as a teacher, trainee, or
student for any part of two (2) of the six (6) preceding calendar years.
Individuals
who are in F-2, J-2, or M-2 immigration status are not eligible for FICA
exemption under Section 3121(b)(19) because their primary purpose is to
be a dependent.
When
an employee has met the Substantial Presence Test, the NRA Tax Accountant
shall classify him or her as a resident
alien for tax purposes and the employee is no longer eligible for
exemption from FICA tax according to Section 3121(b)(19).
UA is required to withhold FICA tax retroactive to the first day
of physical presence in the U.S. in the year the individual became a resident
alien. If the employee is also
a student, he or she may still qualify for exemption under Section 3121(b)(10).
3. FICA Exemption Based Upon a Tax Treaty
An
employee may be exempt from the employee portion of FICA tax based upon
a tax treaty. To qualify for this
exemption, the employee must complete IRS
Form 8233 (see SECTION 3.9) and submit Form 8233 and other necessary
documentation to the NRA Tax Accountant.
In most cases, no withholding
exemption will be available to the employee due to a tax treaty. However, if a withholding exemption is available
to the employee, UA shall still pay the employer portion of the FICA tax.
4. FICA Exemption Based Upon a Social Security
Totalization Agreement
An
employee and UA may be exempt from the employee and employer portions
of FICA tax based upon a Social Security Totalization Agreement. To qualify for this exemption, the employee
must establish that the social security tax is being paid to his or her
country of residence with regard to the income earned in the U.S. The employee must obtain a “coverage certificate”
from the social security authorities in his or her country of residence
and submit the coverage certificate to the NRA Tax Accountant. The coverage certificate must contain the following:
(a)
The employee’s name, address,
and taxpayer identification number, date and place of birth, marital status,
citizenship, and country of lawful permanent residence;
(b)
the employer’s name, address,
and taxpayer identification number;
(c)
a statement that a Totalization
agreement is in effect between the foreign country and the U.S. under
which wages received by or paid to the employee by the employer are subject
to taxes or contributions under the social security system of the foreign
country; and
(d)
the date on which the Totalization
agreement began to apply and the date, if determined, when it will cease
to apply.
Upon
receipt of the coverage certificate, the NRA Tax Accountant shall retain
the certificate (the certificate is not to be filed with the IRS) and
inform the Payroll Office of the application of the Totalization agreement. See APPENDIX THREE for a listing of countries
that have Social Security Totalization Agreements.
SECTION 2.2 - Scholarship/Fellowship Payments
A “scholarship” is defined as “an amount paid or allowed to, or for the benefit of, a student, whether an undergraduate or graduate, to aid such individual in pursuing his studies.”
A “fellowship” is defined as “an amount paid or allowed to, or for the benefit of, an individual to aid him in the pursuit of study or research.”
Scholarship/fellowship payments aid the recipient in covering the cost of tuition, fees, books, supplies and/or living expenses while pursuing a course of study or research.
In order for a payment to
be classified as a scholarship/fellowship, there must be no requirement
that the recipient perform services in order to receive the payment. Furthermore, the payment must not be contingent
upon the recipient’s choice of a particular faculty mentor or participation
in a specific research, teaching, or service project. The Tax Manager will make the final determination
of whether a payment is properly classified as a scholarship/fellowship.
Scholarship/fellowship
payments are generally disbursed to (or on behalf of) students through
the Office of Student Receivables, as a credit applied to the student’s
account. Certain scholarship/fellowship payments may
be disbursed through other offices; for example, monthly living expense
payments for student athletes or travel research fellowships are disbursed
through the Payroll Office, or training grant allowances through Accounts
Payable. Each disbursing office
is responsible for withholding any required taxes on scholarship/fellowship
payments, as determined by the NRA Tax Accountant.
A.
Federal Income Tax
“Qualified”
scholarship/fellowship payments, as defined by Internal Revenue Code Section
117, are not included in the student’s income for federal income tax purposes
and are not subject to federal income tax withholding. For a payment to be considered “qualified,”
a student (as permitted by the terms under which the payment is made)
must use the payment for:
1.
tuition and fees required for enrollment
or attendance, or
2.
fees, books, supplies, and equipment required
for courses of instruction.
NOTE:
Student insurance,
which is required of all foreign national students at UA, is considered
a qualified fee.
Scholarship/fellowship
payments paid in excess of qualified scholarships (i.e. room and
board, travel, dorm charges, student health and pharmacy charges, Dining
Dollars, and monthly stipends for living expenses) are included in the
student’s income. Subject to the
provisions of applicable income tax treaties, such excess payments are
subject to withholding under the following rules:
UA
shall withhold federal income tax at a rate of 14%, provided that:
1.
the recipient is temporarily present in
the U.S.,
2.
the recipient is in F, J, M, or Q immigration
status, and
3.
the recipient must be a “Candidate for a
Degree” - present to pursue study, training, or research.
If
the student does not meet the above requirements for application of the
14% withholding rate, UA shall withhold federal income tax from the scholarship/fellowship
payment at the rate of 30%.
To
apply for a withholding exemption on scholarship/fellowship payments based
on a tax treaty, a nonresident alien must contact the NRA Tax Accountant
to complete IRS Form
W-8BEN Certificate of Foreign Status of Beneficial Owner for United States
Tax Withholding, (see SECTION 3.10).
For a listing of countries with which the U.S. has entered income
tax treaty agreements, see APPENDIX TWO.
CAUTION: The fact that an individual’s
country of tax residence is listed does not automatically mean that payments to the individual
will be exempt from tax. Exemption
will depend upon numerous factors, including: the specific provisions
of each treaty, the individual’s length of stay in the U.S., the type
of payment made, and whether the individual has met with the NRA Tax Accountant
to complete the appropriate forms.
If
the individual does not qualify for a tax treaty exemption, the NRA Tax
Accountant will make sure the individual is being taxed at the appropriate
tax rate.
B.
State Income Tax
State Income Tax shall not be withheld from any scholarship/fellowship payments.
C.
FICA Tax
The employee
portion of the FICA tax shall not be withheld from scholarship/fellowship
payments, and UA shall not pay the employer portion of the FICA tax.
SECTION 2.3 - Independent Contractor Payments
Independent contractor payments are made in exchange for services performed by an individual who does not have an employee-employer relationship with UA. A Request for Independent Contractor Status Form (refer to UA SPENDING POLICY , Section VII) must be submitted in advance to the Tax Manager to obtain approval for payments to independent contractors. These are usually short-term visitors providing guest lectures, symposiums, etc.
Independent contractor payments will only be made to an individual whose immigration status allows the receipt of such payments as a matter of law and who has a valid taxpayer identification number. If necessary, the NRA Tax Accountant will consult with CIS to determine the legality of payment. Following are some examples of the most common visa types used by short-term visitors at UA, and the restrictions applicable to each:
B-1 Visitor for Business (and WB Visa Waiver
for Business)
B-2 Visitor for Tourism (and WT Visa Waiver
for Tourism)
May receive an honorarium payment for academic activities lasting no more than nine days at a single institution, if the visitor has not accepted such payment from more than five institutions during the previous six months (9-5-6 rule). If these criteria are not met, the visitor can receive expense reimbursements only (original receipts must be provided). Canadians are visa exempt, which means they do not require a visa to enter the U.S. Canadians admitted without documentation are considered to be under B-1 or B-2 status and may receive an honorarium provided that the 9-5-6 rule is met.
Citizens from the following countries may be granted WB or WT visa waiver stamps by simply completing the I-94W form upon entry into the U.S., as long as certain requirements are met. These countries currently are: Andorra, Argentina, Australia, Austria, Belgium, Brunei, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Monaco, the Netherlands, New Zealand, Norway, San Marino, Slovenia, Spain, Sweden, Switzerland, and the United Kingdom.
J-1 Exchange Visitors
Visitors who will exceed the 9-5-6 rule must obtain J-1 status in order to be paid an honorarium or fee. A J-1 visa is authorized for the sponsoring institution only. Therefore, if the individual is in the U.S. on a J-1 visa from another institution, payment from UA can only be made upon receipt of a letter from the sponsoring institution’s “Responsible Officer.” The letter, along with other documentation, must be forwarded to the NRA Tax Accountant to be placed in the individual’s tax file. Obtaining a J-1 visa requires 6 to 8 weeks of advance planning. A J-1 visa requires that UA prepare Form IAP-66 Certificate of Eligibility for Exchange Visitor (see SECTION 3.3) that must be sent to the invitee. The invitee will have to take Form IAP-66 to the Embassy or Consulate to apply for the visa. There is no cost to the individual associated with obtaining this status. CIS will provide assistance to departments needing to obtain J-1 visas for visitors. If these procedures are not followed, the visitor can receive expense reimbursements only (original receipts must be provided).
TN – Trade NAFTA
Individuals
from Canada or Mexico that exceed the 9-5-6 rule (and there is not enough
time to obtain J-1 status) may obtain TN status in order to be paid an
honorarium. The individuals must be in certain professions
and there is a cost to the individual.
Following is the procedure for obtaining TN Status:
1. Visitor will need to enter the U.S. through a “Class A” airport, which will have a special section set up in the U.S. customs area to process TN paperwork.
2. Visitor must present:
· Proof of citizenship: This may be a short- or long-form birth certificate, passport, or certificate of Canadian or Mexican naturalization.
· Original offer letter: This is a letter from UA to the individual which must contain the following information: title, job duties, period of employment, and amount of pay. In describing the title and job duties, avoid the word “training” which could be misinterpreted by INS officials to mean that the visitor is coming to receive training. For example, if the visitor will be leading a workshop, the word “teaching” would be a better choice.
· Proof of credentials: This is required to show that the individual qualifies for the professional TN status. Usually the proof consists of a notarized copy of their degree (which must be at least a bachelor’s degree). The degree must be related to the job they will be doing in the U.S.
· Payment: A $95 processing fee is required.
3. The visitor should allow an extra 2 ½ to 3 hours at the airport for processing.
4. The visitor will receive an I-94 card with TN stamped on it. On the back of the card, UA will be listed as the employing agent.
5. There is a maximum 12-month period for each TN approval. Therefore, the above process must be repeated each year as needed.
Although the TN status may be quicker to obtain, it is recommended that the individuals obtain J-1 status whenever possible. Therefore, departments should contact CIS as soon as there is intent to invite a short-term visitor.
Once it
is determined that a payment can legally be made, the NRA Tax Accountant
shall determine the individual’s tax status by performing a tax analysis,
and, if needed, shall assist in obtaining an Individual Taxpayer Identification
Number (see SECTION 3.6). Refer
to departmental responsibilities outlined in SECTION 4.1.
A.
Federal Income Tax
In
general, federal income tax shall be withheld from all independent contractor
payments made to a nonresident alien, unless the payment is exempt from
withholding under federal law, which includes a tax treaty between the
U.S. and the nonresident alien’s country of tax residence. For a listing of countries with which the U.S. has entered income
tax treaty agreements, see APPENDIX TWO.
CAUTION: The fact that an individual’s
country of tax residence is listed does not automatically mean that payments to the individual
will be exempt from tax. Exemption
will depend upon numerous factors, including: the specific provisions
of each treaty, the individual’s length of stay in the U.S., the type
of payment made, and whether the individual has met with the NRA Tax Accountant
to complete the appropriate forms.
Subject
to the provisions of applicable income tax treaties, UA shall withhold
federal income tax from independent contractor payments at the rate of
30%. To apply for a withholding exemption on independent contractor payments
based on a tax treaty, a nonresident alien must contact the NRA Tax Accountant
to complete IRS Form 8233 Exemption From Withholding
on Compensation for Independent (and Certain Dependent) Personal Services
of a Nonresident Alien Individual (see SECTION 3.9). Tax treaty benefits will not be granted without
a valid taxpayer identification number (see SECTIONS 3.5 and 3.6).
If
the individual does not qualify for a tax treaty exemption, the NRA Tax
Accountant will make sure the individual is being taxed at the appropriate
tax rate, which is 30%.
B.
State Income Tax
State
Income Tax shall not be withheld from any independent contractor payments.
C.
FICA Tax
The
employee portion of FICA tax shall not be withheld from independent contractor
payments, and UA shall not pay the employer portion of the FICA tax.
III.
FORMS
AND PROCEDURES
IMMIGRATION
SECTION 3.1 – INS Form I-94 Arrival/Departure Record
The INS
Form I-94 is used to document a foreign national’s entrance date, work
authorization status, and period of time admitted to the U.S.
SECTION 3.2 – INS Form I-9 Employment Eligibility Verification
This form
is used by the employer to verify an employee’s eligibility to work in
the U.S. UA is required to have
on file a completed I-9 for all employees, including foreign nationals. The hiring department is responsible for submitting
a completed Form I-9, along with copies of supporting documentation, to
the Payroll Office.
SECTION 3.3 – USIA Form IAP-66P Certificate of Eligibility for Exchange Visitor
Form IAP-66P
is a certificate of eligibility for prospective students, professors,
research scholars, short-term scholars, or specialists to apply for a
visa to travel to the U.S. It
also certifies that the prospective individual has applied for admission
and has been admitted to an institution for studies or employment.
With this form in hand, the prospective individual can visit any
U.S. consulate and apply for a J-1 visa. The certificate also certifies
that the prospective student has sufficient funds in readily available
format to support him/her self while studying in the U.S.
In order to remain in lawful status while in the U.S., among other
things, the J-1 individual must maintain a valid Form IAP-66P at all times.
The J-1 student also needs to have a valid Form IAP-66P in order
to be eligible for on-campus or off-campus employment.
There are other categories of the J-1 status, but UA is not authorized
to hire anyone who is not in one of the above J-1 categories.
SECTION 3.4 – INS Form I-20P Certificate of Eligibility for Nonimmigrant
Student
Form I-20P
is a certificate of eligibility for a prospective student to apply for
a visa to travel to the U.S. It
certifies that the prospective student has applied for admission and has
been admitted to an institution for studies.
It also certifies that the institution has verified that the prospective
student has sufficient funds in readily available format to support him/her
self while studying in the U.S. With
this form in hand, the prospective student can visit any U.S. consulate
and apply for an F-1 visa. In
order to remain in lawful status while in the U.S., among other things,
the student must maintain a valid INS Form I-20P at all times.
The student also needs to have a valid INS Form I-20P in order
to be eligible for on-campus or off-campus employment authorization.
TAX
IDENTIFICATION NUMBERS
SECTION 3.5 – Social
Security Administration Form SS-5
A nonresident
alien must have a Social Security Number (referred to herein as “SSN”)
if he or she is receiving:
1.
employee compensation payments,
2.
scholarship/fellowship payments,
or
3.
independent contractor payments.
*
The nonresident
alien must have a SSN before payment can be made or treaty exemptions
can be granted. Applications can
be obtained from CIS, the NRA Tax Accountant or downloaded from the Social
Security Administration web site: http://www.ssa.gov/online/ss-5.html. The individual will need to take the completed
application and the requested original documents to the local Social Security
Administration Office, which is located at 1118 Greensboro Avenue, Tuscaloosa,
Alabama. The individual must apply in person.
The nonresident
alien should receive his/her SSN via mail within 14 days. The individual should immediately take a copy
of the card to the NRA Tax Accountant, the Payroll Office and/or the Office
of Student Records.
*Nonresident
aliens who are not eligible for a SSN must obtain an Individual Taxpayer
Identification Number (referred to herein as “ITIN”).
SECTION 3.6 – IRS
Form W-7 Application for IRS Individual Taxpayer Identification Number
Nonresident
aliens who are not eligible to receive a SSN must apply for an ITIN using
IRS Form W-7. This generally applies
to independent contractors who are only here for a short period of time. The NRA Tax Accountant will assist the individual
with the application process for obtaining an ITIN. The
individual will need to apply in
person, to the office of the
NRA Tax Accountant, with original passport and INS documents.
UA must have an ITIN on file, or evidence that the individual has
applied for one, before payment can be made or treaty exemptions can be
granted. The nonresident alien
should receive his/her ITIN via mail within 6 – 8 weeks. To insure that UA gets a copy of the ITIN, it will be mailed to
the NRA Tax Accountant’s attention. The
NRA Tax Accountant will forward the ITIN to the nonresident alien. This form may be obtained from the NRA Tax
Accountant or downloaded from the IRS web-site: www.irs.gov/pub/irs-pdf/fw7.pdf
.
UA
INTERNAL USE
SECTION 3.7 – UA Foreign
National Information Form
This general
information form should be completed by the foreign national and taken
to the NRA Tax Accountant when the individual has his/her tax analysis
done. This form will serve as a back-up document
to basic, but very important, information about the foreign national’s
U.S. address, foreign address, citizenship, tax residency, current and
previous immigration status, primary purpose for visit and dates of entries
and exits. This will aid the NRA Tax Accountant in performing the tax
analysis as quickly and accurately as possible.
SECTION 3.8 – UA Nonresident
Alien Student Tax Status Determination Form
This form
is to be completed by the Office of Student Receivables and the NRA Tax
Accountant for any nonresident alien student receiving “excess credits”
(i.e. scholarship/fellowship credits on the student account in excess
of required tuition and fees). The
Office of Student Receivables will list the breakdown of the scholarship
payment that was applied to the student’s account.
The breakdown will consist of the “qualified scholarship” amounts
that are exempt under Section 117 of the Internal Revenue Code and the
excess amounts that are potentially taxable to the student.
The NRA Tax Accountant will then determine if the excess scholarship
payment is exempt under a tax treaty or if the student should be taxed
at the appropriate tax rate. The
NRA Tax Accountant will forward the form back to the Office of Student
Receivables to either exempt the scholarship payment from federal taxes
or charge the student’s account with any required federal tax withholding.
The NRA Tax Accountant will send the student a letter to explain the amount
of tax applied to his/her account.
FEDERAL
TAX
If a nonresident
alien qualifies for exemption from federal taxes on compensation earned
for personal service, he or she must complete IRS Form 8233 and have a
valid taxpayer identification number to receive tax treaty benefits. The distribution and review of IRS Form 8233
shall be the responsibility of the NRA Tax Accountant, who shall oversee
the accurate completion of this form.
The NRA Tax Accountant shall forward the completed form to the
IRS within five (5) days of its receipt from the nonresident alien.
This form
must be filed for each calendar year (January 1 – December 31) for which
a nonresident alien claims income tax treaty benefits. If this form is not completed, no benefits will be granted. Taxes will be withheld at the appropriate rate,
NO EXCEPTIONS. UA will not provide
any refunds of taxes withheld due to failure of the individual to complete
Form 8233. The individual will
have to apply for a refund when filing his/her U.S. income tax return.
In the
case of a UA employee, the NRA Tax Accountant will forward a copy of the
completed Form 8233 to the Payroll Office.
In the case of an independent contractor, the NRA Tax Accountant
will forward a copy of the completed Form 8233 to Accounts Payable as
an attachment to the Miscellaneous Disbursement Voucher (MDV) requesting
payment. The NRA Tax Accountant
reviews MDVs for nonresident aliens prior to payment being made.
SECTION 3.10 – IRS
Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United
States Tax Withholding
Form W-8BEN
is used by a nonresident alien individual to (1) certify foreign status,
(2) claim an income tax treaty exemption for a non-service scholarship/fellowship
grant, or (3) claim an income tax treaty exemption or tax rate reduction
for passive income (e.g. royalties, dividends, interest, or certain portfolio
interest). The distribution and
review of this form shall be the responsibility of the NRA Tax Accountant. A completed Form W-8BEN is not to be filed
with the IRS; the NRA Tax Accountant shall retain it and forward a copy
to the appropriate disbursing office. Generally, a Form W-8BEN is valid
for a period of three years, but UA requires the individual to have an
updated tax analysis each year.
If an individual is otherwise eligible for treaty
benefits, but fails to complete Form W-8BEN or does not have a valid taxpayer
identification number, UA will withhold federal taxes at the applicable
tax rate, NO EXCEPTIONS. UA will
not provide any refunds of taxes withheld due to failure of the individual
to complete Form W-8BEN. The individual
will have to apply for a refund when filing his/her U.S. income tax return.
SECTION 3.11 – IRS
Form W-9 Request for Taxpayer Identification Number and Certification
IRS
Form W-9 has multiple purposes. It
is used 1) to obtain a taxpayer identification number, 2) as a certificate
of U.S. citizen or resident aliens status, and 3) to claim exemption from
withholding under a treaty for resident aliens.
Nonresident
alien students and trainees from Jamaica, Barbados and Hungary may elect
to be treated as resident aliens for tax purposes by completing Form W-9
even if they do not meet the Substantial Presence Test as described in
APPENDIX ONE. The purpose of this election is to permit
the student/trainee to qualify for additional tax benefits available to
U.S. residents.
Foreign
nationals who are resident aliens because they passed the Substantial
Presence Test may still qualify for treaty benefits under the Savings
Clause of their country’s treaty. The
NRA Tax Accountant shall inform the individual at the time of the tax
analysis. If the individual is still eligible for treaty
benefits, IRS Form W-9 must be completed with special notations. This form must be completed each calendar
year (January 1 – December 31) for which the resident alien claims income
tax treaty benefits. A completed
Form W-9 is not to be filed with the IRS; the NRA Tax Accountant shall
retain it and forward a copy to the Payroll Office.
SECTION 3.12 – IRS
Form W-4 Employee’s Withholding Allowance Certificate
Nonresident
aliens who receive employee compensation payments must submit a completed
Form W-4 to the NRA Tax Accountant. Because
of the restrictions on a nonresident alien’s filing status, the limited
number of personal exemptions a nonresident alien is allowed, and because
a nonresident alien cannot claim the standard deduction, the IRS Form
W-4 shall be completed in accordance with the following rules:
1.
Regardless of actual marital status, “Single”
must be checked on Line 3.
2.
Only one (1) withholding exemption may be
claimed on Line 5, unless an applicable tax treaty provides otherwise.
3.
An additional amount of $15.30 biweekly
or $33.10 monthly shall be deducted on Line 6.
4.
“Exempt” withholding status may not
be claimed on Line 7.
If the
foreign national does not complete IRS Form W-4, or Form W-4 is completed
incorrectly, federal income tax must be withheld from the employee’s compensation
on the basis of Single with no exemptions (“Single and 0”).
The distribution
and review of this form shall be the responsibility of the NRA Tax Accountant.
The NRA Tax Accountant will forward the completed Form W-4 to the
Payroll Office. A completed Form W-4 generally is effective until a new Form W-4
is submitted to the Payroll Office.
SECTION 3.13 – IRS
Form 8843 Statement for Exempt Individuals and Individuals With a Medical
Condition
Nonresident
aliens who are present in the U.S. under an F, J, M, or Q immigration
status are entitled to exclude days of U.S. presence for purposes of the
Substantial Presence Test (see APPENDIX ONE).
They must complete Form 8843 and submit it along with their U.S.
income tax return to the IRS. Foreign
nationals who were unable to leave the U.S. because of a medical condition
or medical problem must also complete IRS Form 8843.
The instructions to IRS Form 8843 provide guidance on retaining
nonresident alien status. This
form may be obtained from the NRA Tax Accountant. It is the nonresident
alien’s responsibility to file this form with the IRS.
SECTION 3.14 – IRS
Form 8840 Closer Connection Exception Statement for Aliens
IRS Form
8840 must be completed by foreign nationals who have passed the Substantial
Presence Test (see APPENDIX ONE) and are considered resident aliens for
tax purposes, but want to be treated as nonresident aliens. The individual
must satisfy to the IRS that they have a closer connection to their country
of tax residence. This form must be filed with the IRS along
with the individual’s income tax return. This form may be obtained from
the NRA Tax Accountant. It is
the nonresident alien’s responsibility to file this form with the IRS.
STATE
TAX
SECTION 3.15 – Form A-4 Employee’s Withholding Exemption Certificate (Alabama
Department of Revenue)
Form A-4
is used to claim personal exemption(s) for State Income Tax withholding
purposes. If a completed Form
A-4 cannot be obtained by the Payroll Office, State Income Tax must be
withheld from employee compensation on the basis of no exemptions (“Single
and 0”). A completed Form A-4 generally is effective
until a new or amended Form A-4 is submitted to the Payroll Office. IRS Form W-4 cannot be used in place of Form
A-4. The distribution and review of this form shall be the responsibility
of the NRA Tax Accountant.
SECTION 3.16 – Form A-4E Employee’s Withholding Exemption Certificate (Alabama
Department of Revenue)
Form A-4E
is used to claim complete exemption from State Income Tax. To qualify,
the employee must:
1.
be a full-time student,
2.
be engaged in temporary employment,
3.
expect to earn less than $1,800.00
during the year, and
4.
expect to owe no State Income
Tax for the year.
The student
must submit a completed Form A-4E (instead of Form A-4) to the NRA Tax
Accountant. The distribution and review of this form shall be the responsibility
of the NRA Tax Accountant.
YEAR-END
REPORTING
SECTION 3.17 – IRS Form 1042-S Foreign Person’s U.S. Source Income Subject to Withholding
IRS Form
1042-S is used to report nonresident alien scholarship/fellowship payments,
employee compensation payments that are exempt from federal taxes under
an income tax treaty and independent contractor payments.
To the extent that all or a portion of an employee compensation
payment is not covered by a tax treaty and is subject to federal income
tax withholding pursuant to IRS withholding tables, an IRS Form W-2 shall
be used to report such payment. The
NRA Tax Accountant is responsible for preparing IRS Form 1042-S with respect
to all payments to nonresident aliens. The NRA Tax Accountant shall also
be responsible for electronically filing the 1042-S with the IRS.
The Payroll Office shall be responsible for mailing the 1042-S
statements to the nonresident aliens by March 15th of the current
year for the preceding tax year (e.g. March 15, 2003 for 2002 tax year).
SECTION 3.18 – IRS
Form 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign
Persons
IRS Form
1042 is used to report tax withheld on certain income of nonresident aliens. Every U.S. withholding agent who receives,
controls, has custody of, disposes of, or pays any fixed or determinable
annual or periodic income must file an annual return for the preceding
calendar year. The Payroll Office shall be responsible for
filing this form with the IRS by March 15th of the current
year for the preceding tax year (e.g. March 15, 2003 for 2002 tax year).
SECTION 3.19 – IRS
Form W-2 Wage and Tax Statement
IRS Form
W-2 is used to report taxable compensation earned by an individual. The Payroll Office is responsible for producing
these forms and mailing them to the employee by January 31st
of the current year for the preceding tax year (e.g. January 31, 2003
for 2002 tax year).
IV. IMPLEMENTATION
AND COMPLIANCE RESPONSIBILITIES
SECTION 4.1 – UA Departments
and Administrative Offices
UA shall
comply with federal and state tax laws, as well as immigration laws, according
to the procedures contained in this Policy.
Tax withholding and payments are an essential part of UA’s compliance
effort, and UA shall ensure that payments made to nonresident aliens are
properly reported and that taxes are remitted to the appropriate government
agencies.
For UA
to comply with the requirements of federal and state tax laws, as well
as immigration laws, each Department and Administrative Office MUST share
the responsibility for compliance. A
single Department or Administrative Office cannot do all that is required
to maintain compliance; therefore, a coordinated effort is essential.
Departments
hosting nonresident aliens will generally be aware of a nonresident alien’s
arrival date (in some cases the arrival date is known far in advance of
the actual arrival). To ensure
that a nonresident alien may receive prompt payment, Departments are responsible
for the following:
A.
Must immediately notify the
NRA Tax Accountant upon becoming aware that a foreign national will be
seeking payment of any kind from UA. The NRA Tax Accountant will determine the individual’s tax status
and, if necessary, will consult with CIS to determine if the individual
can be paid based on the individual’s immigration status.
B.
Must provide a clear description
of the reason for payment.
C.
For independent contractor
expense reimbursements (where no fee is paid): must submit original expense
receipts with the MDV.
D.
For independent contractor
fee/honoraria payments: must follow standard procedures for Independent
Contractor Status Forms and Professional Service Agreements as detailed
in UA
SPENDING POLICY
, Section VII.
E.
Must provide a SSN or an ITIN,
if known, on a Request for Personnel Action (PA) form or a Miscellaneous
Disbursement Voucher (MDV) requesting that payment be made to a nonresident
alien. An individual should not be allowed to begin
work until he/she has obtained a SSN/ITIN or provided evidence that he/she
has applied for one. (NRA
Tax Accountant shall assist the independent contractor in obtaining an
ITIN.) Refer to SECTIONS 3.5 and
3.6.
NOTE: This requirement does
not apply to payments that are “expense reimbursement only” with original
receipts.
SECTION 4.2 – Nonresident Alien Tax Accountant
The NRA
Tax Accountant is designated as the person responsible for coordinating
UA’s effort to comply with tax laws applicable to foreign nationals. The NRA Tax Accountant shall carry out the
following responsibilities:
A.
Tax Analysis
The
NRA Tax Accountant shall perform a tax analysis on each foreign national
individual receiving payment from UA and forward information to the Payroll
Office, Office of Student Receivables, or Accounts Payable, as appropriate.
The
individual must go to the NRA Tax Accountant’s office and have a tax analysis
done. Tax analysis will be done
by appointment only. The individual must take the following documents:
·
Passport (including visa page
and I-94 card)
·
Immigration paper IAP-66P
or I-20P (see SECTIONS 3.3 and 3.4)
·
Social Security Card*
·
Foreign National Information
Form, if completed in advance (see SECTION 3.7)
*
Each foreign national must apply for a SSN or ITIN as soon as possible
upon arrival. Refer to SECTIONS
3.5 and 3.6 for a description of forms and procedures.
The tax analysis consists of the following
components:
1. U.S.
Tax Residency Test (see APPENDIX ONE)
The
NRA Tax Accountant, in accordance with the requirements of the “Green
Card Test” and the “Substantial Presence Test,” shall evaluate each foreign
national. The NRA Tax Accountant
shall:
a.
Inform the Payroll Office, Office of Student
Receivables, and Accounts Payable, as appropriate, whether a foreign national
who receives employee compensation payments, scholarship/fellowship payments,
or independent contractor payments is a nonresident alien or resident
alien.
b.
Promptly report to the aforementioned offices
any changes in the nonresident status of a foreign national who receives
employee compensation payments, scholarship/fellowship payments, or independent
contractor payments.
c.
Inform the Payroll Office, Office of Student
Receivables, and Accounts Payable of those tax withholding and payment
rules that apply to each resident alien that would be inapplicable to
an U.S. citizen (i.e., when a tax treaty applies to a resident alien).
2. Income
Tax Treaties
The
U.S. is a party to income tax treaties with a number of countries. The
NRA Tax Accountant is responsible for reviewing and determining the application
of income tax treaties currently in force, obtaining information regarding
new treaties, monitoring the expiration or amendment of treaties and maintaining
the current list of treaty countries attached hereto (see APPENDIX TWO).
CAUTION: The fact that an individual’s
country of tax residence is listed does not automatically mean that payments to the individual
will be exempt from tax. Exemption
will depend upon numerous factors, including: the specific provisions
of each treaty, the individual’s length of stay in the U.S., the type
of payment made, and whether the individual has met with the NRA Tax Accountant
to complete the appropriate forms.
3. Immigration Status
The
NRA Tax Accountant will use the individual’s current visa status, as well
as previous visas held, in determining eligibility of treaty benefits. It is very important that the individual bring
all the requested documents to facilitate an accurate tax analysis.
The
NRA Tax Accountant shall be responsible for entering all treaty exemptions,
visa information, entry date, country of citizenship, and all applicable
federal and state withholding tax rates into the payroll system. This information will be entered at the time
the analysis is completed.
B.
Year End Tax Reporting (1042-S)
The
NRA Tax Accountant will coordinate the annual 1042-S reporting to individuals
and IRS. This process involves
ensuring that information is compiled accurately from all payment systems
and reported properly, as well as responding to inquiries from the IRS
or the nonresident alien individuals concerning Form 1042-S.
C.
Compliance Program
In
order to facilitate University-wide compliance with this Policy, the NRA
Tax Accountant shall be responsible for the following:
1.
Providing training and assistance to departments
as needed.
2.
Notifying foreign nationals about tax analysis
requirements and other foreign national tax related issues.
3.
Updating this Policy and notifying departments
of any change in procedures that may occur.
The NRA
Tax Accountant may be contacted at the following address and telephone
number:
Nonresident Alien
Tax Accountant
Financial
Accounting and Reporting
301
Rose Administration Building
Box
870136
Tuscaloosa,
Alabama 35487-0136
(205)
348-8865
(205)
348-7282 fax
SECTION 4.3 – Capstone
International Services (CIS)
CIS is
designated as the office responsible for coordinating UA’s effort to comply
with immigration laws applicable to foreign nationals. CIS shall carry out the following responsibilities:
A.
Assist departments in obtaining the appropriate
visa status for visitors, employees, and students.
B.
Refer all student foreign nationals to the
NRA Tax Accountant for tax analysis.
C.
Assist the NRA Tax Accountant in getting
information to the foreign nationals.
D.
Coordinate orientation for foreign national
students.
E.
Provide guidance and assistance to the foreign
national students regarding immigration issues.
F.
Approve work authorization status of foreign
nationals.
CIS may
be contacted at the following address and telephone number:
Capstone International Services
105 B.B. Comer Hall
Box 870254
Tuscaloosa, Alabama 35487-0254
(205) 348-5402
(205) 348-5406 fax
SECTION 4.4 – Payroll Office
The Payroll
Office shall be responsible for the following duties:
A.
Reporting and transmission
of all tax withholdings and tax payments to the appropriate federal and
state authorities.
B.
Monitoring the student enrollment
status on all student employees, in order to either grant or deny FICA
exemption based on student status.
C.
Entering into the payroll
system all FICA information for foreign national employees.
D.
Providing the NRA Tax Accountant
with monthly reports of individuals with invalid social security numbers.
E.
Providing periodic reports
that reflect nonresident aliens receiving payments through payroll.
F.
Forwarding a copy of all Personnel
Action Forms for nonresident aliens to the NRA Tax Accountant.
G.
Providing year-end reporting
information on nonresident aliens to the NRA Tax Accountant to prepare
1042-S statements.
H.
Mailing the 1042-S statements
to the nonresident aliens.
I.
Preparing and filing IRS Form
1042.
The Payroll
Office may be contacted at the following address and telephone number:
Payroll Office
303 Rose Administration Building
Box 870128
Tuscaloosa, Alabama 35487-0128
(205)
348-5221
(205) 348-2182 fax
SECTION 4.5 – Office of Student Receivables
The Office
of Student Receivables shall be responsible for:
A.
Producing the “excess credit” report to
identify students receiving scholarship/fellowship credits on their student
accounts that are in excess of qualified amounts (see SECTION 2.2). This report should be run along with the student
refund program at the beginning of each academic term and every 14 days
throughout the term to pick up any changes on student accounts.
B.
Charging the student accounts with the federal
tax withholding, as directed by the NRA Tax Accountant. This transaction places the tax into a UA liability
account used by the Payroll Office to make the federal tax deposit.
C.
Producing the “nonresident alien withholding
tax” report and forward to the Payroll Office. This report will be used by the Payroll Office
to reconcile the amount of federal tax that was placed into the liability
account to be deposited with the next federal tax deposit.
The Office
of Student Receivables may be contacted at the following address and telephone
number:
Office
of Student Receivables
105
Student Service Center
Box
870120
Tuscaloosa,
Alabama 35487-0120
(205)
348-5350
SECTION 4.6 – Tax Manager
The Tax
Manager shall carry out the following responsibilities:
A.
Make final determination when
questions arise as to the proper classification of payments (e.g. scholarship/fellowship,
employee compensation, or independent contractor fees).
B.
Approve Request for Independent
Contractor Status for departments wishing to pay professional service
fees to individuals.
C.
Review UA policies and procedures
to ensure compliance with federal tax law.
D.
Oversee the coordination of
efforts between the various administrative offices to insure adherence
to UA policies and procedures.
E.
Provide guidance and assistance
to NRA Tax Accountant as needed.
The Tax
Manager may be contacted at the following address and telephone number:
Tax
Manager
Financial
Accounting and Reporting
301
Rose Administration Building
Box
870136
Tuscaloosa,
Alabama 35487-0136
(205)
348-2963
(205)
348-7282
APPENDIX ONE
U.S.
Tax Residency Tests
Green Card Test
A foreign national shall be treated as an U.S. resident alien for tax purposes if he or she is a lawful permanent resident at any time during a calendar year. U.S. resident status continues until the permanent residency status is rescinded or judicially determined to have been abandoned. The foreign national shall be deemed to have obtained this status if he or she has been:
1. granted lawful permanent resident status and
2. issued or will receive an alien registration card (also known as a “green card”) by the Immigration and Naturalization Service.
Substantial Presence Test
A foreign national satisfies the substantial presence test if he or she is physically present in the U.S. for at least:
1. 31 days during the current calendar year and
2. 183 days during the three-year period that includes the current year and the two years preceding the current year.
The foreign national must satisfy both parts of the test.
The 31-day test:
1. Count the days in the current year the foreign national has been physically present in the U.S.
2. If the number totals 31 or more, the first part of the Substantial Presence Test is satisfied.
The 183-day test:
1. Count all days the foreign national was present in the U.S. during the current year,
2. Count one-third of the days the individual was present during the first preceding year, and
3. Count one-sixth of the days the individual was present during the second preceding year.
4. If the number totals 183 or more, the second part of the Substantial Presence Test is satisfied.
The Substantial Presence Test must be applied each year, always taking into account the current year (the year being tested) and the two preceding years.
The NRA
Tax Accountant will perform the Substantial Presence Test as part of the
tax analysis.
NOTE: When a foreign national
satisfies the Substantial Presence Test during a year, he or she is retroactively
classified as a resident alien as of the first day of physical presence
in the U.S. of such year.
Provided that a number of requirements are met, an individual may elect to be treated as a U.S. resident for the calendar year that immediately precedes the calendar year during which the individual meets the Substantial Presence Test. Additional information regarding this election may be obtained from the NRA Tax Accountant.
APPENDIX TWO
Income Tax
Treaties in Force
As of January 1, 2002
CAUTION: The fact that an individual’s country of tax
residence is listed does not
automatically mean that payments to the individual will be exempt from
tax. Exemption will depend upon
numerous factors, including: the specific provisions of each treaty, the
individual’s length of stay in the U.S., the type of payment made, and
whether the individual has met with the NRA Tax Accountant to complete
the appropriate forms.
Armenia Latvia
Australia Lithuania
Austria Luxembourg
Azerbaijan Mexico
Barbados Moldova
Belarus Morocco
Belgium Netherlands
Canada New Zealand
China, People’s Republic of Norway
Cyprus Pakistan
Czech Republic Philippines
Denmark Poland
Egypt Portugal
Estonia Romania
Finland Russia
France Slovak Republic
Georgia Slovenia
Germany South Africa
Greece Spain
Hungary Sweden
Iceland Switzerland
India Tajikistan
Indonesia Thailand
Ireland Trinidad and Tobago
Israel Tunisia
Italy Turkey
Jamaica Turkmenistan
Japan Ukraine
Kazakstan United Kingdom
Korea, Republic of South Uzbekistan
Kyrgystan Venezuela
APPENDIX THREE
Social
Security Totalization Agreements in Force
Austria
Belgium
Canada
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom