INTERNATIONAL TAX
International Tax OverviewAdministrator’s GuideJoint International Training PresentationKey Terms And Frequently Asked Questions |
Forms and Acronyms ^Go back
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IRS |
Internal Revenue Service
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I-9 Form |
Employment Eligibility Verification
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I-94, I-94W |
White or green card issued to every international person arriving in the U.S.; documents legal arrival, status, and length of stay. (White is for persons with visas; green is for persons from visa waiver countries).
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W-9 |
Request for Taxpayer Identification Number and Certification; required of all persons receiving wages.
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W-2 |
Employer Wage and Tax Statement issued to persons with wages at end of each year for use in filing a tax return.
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W-4 |
Employees Withholding Allowance Certificate; provided to employer to determine amount of tax to withhold from wages. (Special rules for nonresident aliens)
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W-7 |
Application for Taxpayer Identification Number; persons receiving payments but who do not qualify for a SSN must apply for an ITIN.
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W-8BEN |
Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding; most often used here for persons claiming tax treaty benefits for stipends. May be used by a foreign company to claim tax treaty benefits for services performed in the U.S.
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W-8ECI |
Certificate of Foreign Person’s Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States. Used by foreign companies to claim an exemption from withholding based on the fact they are registered to do business in the U.S. and are required to file a tax return based on business profits.
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Form 8233 |
Exemption from Withholding on Compensation for Independent (and certain Dependent) Personal Services of a Nonresident Alien Individual; used by persons receiving wages to claim treaty benefits and to guest speakers or consultants claiming treaty benefits.
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1042S |
Foreign Person’s U.S. Source Income Subject to Withholding; issued at end of year to persons with any nonwage payments and taxes and to persons with wages that were exempt from tax withholding due to a tax treaty.
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SS-5 |
Application for a Social Security Card
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SSN |
Social Security Number
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SSA |
Social Security Administration; agency where SS-5 is filed to obtain an SSN
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ITIN |
Individual Taxpayer Identification Number; Issued to individuals not eligible for a SSN, but who have tax filing requirements or wish to file for a refund, where applicable.
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FICA |
FICA (Federal Insurance Contributions Act) tax is made up of two pieces, OASDI that funds Social Security, and the piece devoted to Medicare. You may hear the terms ‘Social Security Tax’ and ‘Medicare’ Tax. The two referred to together is FICA tax.
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VISA status |
Visa Classifications used by U.S. citizenship and Immigration Services that define the reason for the person coming to the U.S. and defining the nature of any services, for whom they can be performed and what remuneration can be received. There are many, covering most alphabet letters, often with several subcategories within the alphabet letter. The most common seen on campus are F-1(students), J-1(students or non-student exchange visitors), H-1B, O, or TN temporary workers.
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WB/WT |
Persons arriving from countries participating in the Visa Waiver Program; No visa is required. Form I-94W is issued upon arrival that will be stamped W-B (waiver -business) or WT (waiver-Tourist) or WB/WT. These are the equivalent of the B-1 and B-2 visa. These visa categories will often be used by persons with guest speaking engagements. |
See ISS and OIS web sites for additional information related to Visa categories usually found on our campus.
http://www.vanderbilt.edu/ois/
http://www.vanderbilt.edu/isss/
Glacier Non-Resident Alien Tax Compliance System ^Go Back
Vanderbilt University uses secure online tax compliance software to capture the information required to determine the actual tax status of an international individual. The current visa category and tax status (resident or nonresident for tax purposes) must be known in order to process any payment correctly
The individual must have a password to access the software. As soon as International Tax is notified that there is a potential payment, a record for the individual is set up in Glacier. An email is sent from support@online-tax.net that provides a link and password, along with information about U.S. Tax law. Since the individual may confuse this with ‘phishing’ scams, we normally send an email explaining that it is valid and giving further instructions.
The individual, using immigration documents, completes a questionnaire. The questionnaire captures the current and past immigration status, days of presence in the US and any treaty-related information. It also captures needed personal information such as address and tax ID number required to issue Form 1042S and allow treaty benefits.
Once the individual enters his or her information, Glacier determines the tax status of the individual, and populates all required forms (much in the same way that a computerized income tax program prepares Form 1040 and any needed attachments based on what was entered). The person can print and sign the forms and submit to HR Finance, International Tax.
In addition to forms printed from Glacier, the International Tax Office needs copies of the immigration documents. The Tax Summary Sheet lists these documents as well as the forms completed by Glacier. An instruction sheet, printed out with the forms, provides information about where to send the forms.
It is important that Glacier is updated any time there is a change of address, or any visa changes occur. This needs to continue until the person either leaves Vanderbilt or becomes a permanent resident.
Performing the Substantial Presence Test ^Go Back
A person in nonimmigrant status (visa status) may be considered a ‘resident alien’ or ‘nonresident alien’ by the IRS. There is a formula used to determine into which category a person fits. It is known as the ‘substantial presence test’. It must be performed annually, as it is possible to switch between being a resident and nonresident if there have been certain changes in visa status over the past several years. For more information, please see Nonresident Alien or Resident Alien section in IRS Publication 519, U.S. Tax Guide for Aliens. This is available from the IRS website. http://www.irs.gov/pub/irs-pdf/p519.pdf
One of the primary purposes of Glacier is to perform the substantial presence test using the visa information entered for times of presence in various statuses through the years. It will also calculate the projected start date of U.S. tax residency.
To meet the test to be considered a resident for tax purposes, a person must physically be present at least 31 days in the current year. If so, continue with the test below.
At least 31 days in the current year (count all days present in the current year).
Add 1/3 of the days of last year
Add 1/6 of the days of the year just before that (for example: 45 days in 2006, 1/3 of the days in 2005 and 1/6 of the days in 2004).
If the total of the days equals 183 days or more, the substantial presence test is met, and the person is treated as a resident for tax purposes for the year.
Do not count days as an exempt individual. (For example, a student with an F-1 visa and in the U.S. with an F-1 for less than 5 years would not count days in 2006 that he or she was still in F-1 visa status. However, if the person changed status to an H-1B during 2006, days are counted starting with the date of the change to the H-1B. Depending on the time of the year of the visa status change, the person might remain a nonresident or could become a resident for tax purposes if 183 days pass as an H-1B).
‘Exempt individual’ individual does not mean someone exempt from U.S. Tax. It means persons in categories who are not required to count days of presence toward the substantial presence test. The visa status where this applies, and is commonly seen on campus, is either teachers or trainees in J-1 status (2 of the 6 preceding calendar years) or students in F-1 or J-1(student) visa status (5 calendar years in a lifetime). There are other rules related to days that must be counted or can be exempt under certain conditions or Visa types. See IRS Publication 519, U.S. Tax Guide for Aliens for additional information. http://www.irs.gov/pub/irs-pdf/p519.pdf
Special W-4 Rules for ‘Nonresident aliens” ^Go Back
U.S. citizens and ‘resident aliens’ for tax purposes should complete Form W-4 based on Form W-4 instructions and a review of personal tax withholding needs in order to closely approximate the tax liability at the end of the year. However, persons considered by the IRS as ‘nonresident aliens’ must complete Form W-4 in a specific way.
- Check only Single, regardless of actual marital status
- Claim only one withholding allowance (exceptions apply for certain countries*)
- Write ‘nonresident alien’ on line 6 (unless a student from India). Additional withholding can be requested on line 6, if desired.
- Do not claim exempt withholding status on line 7.
*Residents of American Samoa, Canada, Mexico and the Northern Mariana Islands may claim additional withholding allowances for spouse and dependents following the same rules as a U.S. person.
Residents of Korea (and Japan, under old treaty where still applicable) may claim additional withholding allowances for spouse and dependents present with them in the U.S. and following same rules as for U.S. citizens. (Japanese old treaty can only apply to persons who entered the U.S. prior to December 31, 2004).
Special rules for India apply only to students. Students from India may claim one additional withholding allowance for a spouse present in the U.S. who has no gross income and withholding allowances for any dependents present in the U.S. and who are also resident aliens of the U.S. See Withholding from Compensation section of IRS Publication 519 or IRS Publication 15, Circular E Employers Tax Guide
Glacier completes Form W-4 as required, and the form can be printed, signed and dated. If the information entered indicates a person is from one of the countries with special rules, the individual completing Glacier will see screens that allow entry of extra withholding allowances, if applicable.
FICA Tax Exemption ^Go Back
A person in F-1 or J-1 status is exempt from FICA as long as the individual is not a resident for tax purposes and is in substantial compliance with the visa status. The FICA tax is due for the entire year in which the individual will reach the ‘resident alien’ status, even though it may be several months into the year before the individual actually becomes a resident for tax purposes. Withholding of FICA should begin January 1. If the individual leaves the country prior to reaching the date of becoming a resident, the withheld FICA can be refunded. Dependents of either visa status are subject to FICA withholding(whether in compliance or out of compliance with visa status, as an F-2 can not work, and a J-2 can work only with an EAD). Persons in F-1 or J-1 student status may be eligible for a FICA exemption after becoming a resident for tax purposes, based on the same rules as for a U.S. student meeting the ‘student’ exemption requirements.
See Students and Exchange Visitors in Social Security and Medicare Taxes section in IRS Publication 519, U.S. Tax Guide for Aliens for additional information. http://www.irs.gov/pub/irs-pdf/p519.pdf
U. S Tax Treaties ^Go Back
The United States and certain other countries have established treaties that provide exemption from federal withholding taxes. These generally do not apply to any exemption from FICA, only the withholding tax. Each income type for which a country has an exemption is based on the primary purpose of this ‘visit’, and generally relates to the primary purpose of the original entry visa if visa status changes while in the country. For more information about the countries and the types of tax exemptions, please see IRS publication 901, which is updated periodically, but may not always be current with the most recent changes. http://www.irs.gov/pub/irs-pdf/p901.pdf
Vanderbilt uses an online information collection system, Glacier, to capture the information needed to determine if the international person may qualify for a treaty exemption. Glacier also completes the necessary forms needed to claim the exemption. (The person must have either a SSN or ITIN in order to claim the exemption from withholding. Treaty benefits are applied for at the time the tax return is filed, and any tax withheld can be refunded). See Tax Treaty Benefits section of IRS Publication 519, U.S. Tax Guide for Aliens for additional information. http://www.irs.gov/pub/irs-pdf/p519.pdf
Vanderbilt University is responsible for reviewing the information and submitting Form 8233 to the IRS. As the withholding agent, Vanderbilt University reserves the right to deny treaty benefit exemption of withholding tax if review of documents and other information indicates benefits might not apply. The individual can claim benefits at the time of tax filing, if he or she believes they do apply.
Form 8233 expires at the end of each calendar year. Form W-8 may expire at the end of the third calendar year. Near the end of the year, an email is generated from Glacier reminding each person who possibly qualifies to submit a new form.
Visa Categories and Employment Restrictions ^Go Back
(This section is currently under construction. Please check back later.)
Contact Information ^Go Back
International Tax Office
Vanderbilt University Human Resources
Email: nratax@vanderbilt.edu
Phone: 615-343-7102 Fax: 615-322-1173
Office Hours
Walk-in office hours:
Tues: 1:30 – 3:30
Wed: 9:30 – 11:30
Other hours by appointment only
Vanderbilt University is committed
to principles of equal opportunity and affirmative action.
HR Express 2525 West End Ave Suite 218 Nashville TN 37203 Hours M-F 7:30 - 5:30 Last Updated: October 19, 2009 |
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