Slide 1

FastFactsFeature Presentation

December 9th, 2008

We are using audio during this session, so please dial in to our conference line…

Phone number: 877-322-9648 Participant code: 182500

Slide 2

Today’s TopicWe’ll be taking a look at…

Hiring a Non U.S. Citizen

Slide 3

Today’s PresenterDenise Church Senior Accountant, Controller’s Office

Slide 4

Session Segments

PresentationDenise will address hiring a Non-U.S. Citizen.During Denise’s presentation, your phone will be muted.

Q&AAfter the presentation, we’ll hold a Q&A session. We’ll open up the phone lines, and you’ll be able to ask questions. Denise will answer as many of your questions as time allows.

Slide 5

Contact Us

If you would like to submit a question during the presentation or if you’re having technical difficulties, you can email us at: fastfacts@jhu.eduYou can also send us an instant message!

GoogleTalk – HopkinsFastFacts@gmail.comAOL Instant Messenger – HopkinsFastFactsMSN – FastFacts@jhu.edu

Slide 6

Survey

SurveyAt the end of this FastFacts session, we’ll ask you to complete a short survey. Your honest comments will help us to enhance and improve future FastFacts sessions.

Slide 7

Hiring a Non U.S. Citizen

Slide 8

Agenda

Today we’ll discuss:Information required to hire a non U.S. citizen to work in the U.S.The importance of creating the ISR correctly How tax residency status is determined in SAPProper taxation of non U.S. citizensTreaty benefitsTax reporting documents issued to non U.S. citizens

Slide 9

Introduction

Slide 10

Assumptions

Non U.S. citizen is present in the United StatesHas appropriate work authorizationRequired information

Nationality (country of citizenship)Visa typeImmigration documentsOriginal U.S. arrival dateTemporary or permanent U.S. Social Security number

Slide 11

Creating the ISR

Slide 12

Key Fields on the ISR

Slide 13

Key Fields on the ISR

Nationality- Country of citizenshipCommon Visa Types

F-1 – Academic studentJ-1 – Exchange visitor (may be a student or a non-student)H1-B1 – Worker in a specialty occupationTN – Professional business person from Canada or Mexico (NAFTA) LPR – Lawful Permanent Resident – “Green Card Holder”

Slide 14

Key Fields on the ISR-continued

Visa Issue Date- taken from immigration documents

Visa End Date- taken from immigration documents

Expiry of WP- taken from immigration documents Generally matches the visa end date

Slide 15

I-20 Form for StudentsF-1 academic student visa holders are issued the Form I-20

Use these dates to populate the “Visa Issue Date” and “Visa End Date” on the ISR

Issued by JHU international offices

JHMI (SOM, SOPH, SON)HomewoodCarey Business School & School of EducationPeabodySAIS

Slide 16

Form DS-2019

J-1 visa holders are issued Form DS-2019

Exchange visitor StudentNon-student

Important InformationBox 3- Visa issue/end datesBox 4- Exchange Visitor Category (if the visitor is a student indicate this in the ISR comments section)

Issued by JHU international offices

Slide 17

Original U.S. Entry Date

Must be present in the U.S. and have appropriate work authorization

Tourist visa history is not considered

Date of initial arrival in the U.S.– not arrival at JHU

Date of first arrival in the U.S. holding an F-1, J-1, H1-B1 visaIs the student/scholar coming to JHU from elsewhere in the U.S.?

Does the non U.S. citizen already have a Social Security number? Tip: The first three digits of a SSN issued in MD usually begin with 212 – 220. A SSN beginning with any other three digits was probably not issued in MD.

Slide 18

Arrival Date ScenariosEntered the U.S. from China for the first time on 08/26/08 on an F-1 visa to attend JHU as a graduate student.

Does not have a U.S. Social Security number. Arrival date is 08/26/08.

Entered the U.S. from Germany on 09/04/04 to attend school at New York University. Returned to Germany for brief visits and vacations.

Obtained a U.S. Social Security number in New York. Graduated from NYU in May 2008 and arrived at JHU for graduate school in September 2008. Arrival date is 09/04/04.

Entered the U.S. from Australia on 06/21/06 as a J-1 research scholar. Had visited U.S. before holding a tourist visa on 10/15/01.

Does not have a U.S. Social Security number. Arrival date should be 06/21/06.

Slide 19

Form I-9

Slide 20

Form I-9

Form I-9 – Employment Eligibility Verification

Original Form I-9 is completed by the International Student and Scholar Services Office or other office designated by the individual JHU school

Re-verification of Form I-9 is required to extend work authorization expiration date

Will be required as a result of a visa extension or the issuance of a new visa type

Slide 21

Determining Tax Residency Status

Slide 22

Resident vs. Nonresident Alien

Two separate United States Income Tax Systems

One system applies to U.S. Citizens and Resident Aliens for tax purposes

The other system applies to non-resident aliens for tax purposes

Determining residency status for tax purposes requires obtaining visa history, current visa status and original U.S. arrival date

Slide 23

Tests to Determine Tax Residency

Green Card TestA green card holder or LPR (Lawful Permanent Resident) is a visa type. These individuals are Resident Aliens for tax purposes by definition.

Substantial Presence Test (SPT)Mathematical test calculated by length of time in the U.S. combined with visa type.

Residency status based on the SPT is determined by master data on the new hire ISR.

Slide 24

Taxation

Slide 25

Taxation of Resident Aliens

Resident aliens are taxed exactly like United States citizens. They are entitled to the same deductions and credits.

Not restricted when completing Federal Form W-4

Taxed in the U.S. on worldwide income

Social Security and Medicare tax exemption applies if the resident alien is in full time student status

Slide 26

Taxation of Nonresident Aliens

Nonresident aliens are not taxed like United States citizens. Most cannot claim dependents or a standard deduction on their federal income tax return. They are not entitled to the same deductions and credits.

Nonresident aliens are restricted when completing Federal Form W-4

Nonresident aliens are taxed in the U.S. on income from U.S. sources only

Social Security and Medicare tax exemption applies if the Nonresident Alien is holding an F-1 or J-1 visa

Slide 27

Tax Summary Chart

Federal Income

Tax Withholding

State & Local Income

Tax Withholding

FICA (Social Security &

Medicare Tax)

NRA with Wages Subject to at graduated rates

Subject to at graduated rates

Exempt if holding an F-1 or

J-1 visa

NRA Fellowship Subject to at 14% flat rate

Subject to at graduated rates

Not applicable

RA with Wages Subject to at graduated rates

Subject to at graduated rates

Subject to unless full time

student

RA Fellowship Not applicable Not applicable Not applicable

Correctly identify nonresident aliens in the payroll system so they are properly taxed

Slide 28

Special Rules for NRA Forms W-4

NRA’s can’t claim exempt

Must check “Single,” or “Married,” but withhold at higher single rate box on line 3

Should enter a 1 on line 5

Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4

Slide 29

Examples of Incorrect Tax Treatment

This is incorrect: A nonresident alien holding either an F-1 or J-1 visa earning wages is exempt from Social Security and Medicare tax withholding – if payroll record doesn’t reflect NRA status their wages will be subject to these taxes.

This is incorrect: Fellowship payments received by a Nonresident Alien holding an F-1 or J-1 visa are subject to federal income tax withholding at a flat rate of 14% and to MD income tax at graduated rates - if payroll record doesn’t reflect NRA status these payments will not be subject to withholding.

Slide 30

Treaty Benefits

Slide 31

Treaty Benefits for NRA’s

Many countries have negotiated income tax treaties with the United States. Treaty benefits will impact a nonresident alien’s federal income tax.

Student wage benefits are usually subject to a dollar limit

Fellowship benefits usually provide an unlimited dollar amount

Teacher/researcher benefits usually provide an unlimited dollar amount

Maryland does not recognize tax treaty benefits

The District of Columbia and Virginia do recognize tax treaty benefits

Slide 32

Processing Treaty Benefits

The JHU Tax Office processes treaty benefits and creates the treaty info type IT0556 in the SAP payroll record.

FormsWages: Form 8233 is used to claim a withholding exemption from treaty eligible wages. It is completed by the employee and the JHU Tax Office and then forwarded to the IRS for processing.Fellowships: Form W8-BEN is completed to claim a withholding exemption from treaty eligible fellowship income. It is maintained by the JHU Tax Office.

Slide 33

Tax Reporting

Slide 34

Tax Reporting Documents- W2

Wage and Tax Statement issued each year to employees. Reflects total taxable wages earned each calendar year and total federal and state income tax withheld. Issued to nonresident alien employees who didn’t claim a treaty withholding exemption on their wages or weren’t eligible for a treaty benefit.

Slide 35

Tax Reporting Documents 1042-S

Reports treaty wages received by an NRA Reports non treaty fellowship payments received by an NRA and the federal tax withheld on these paymentsReports treaty fellowship payments received by an NRA Note: Box 16 reflects recipient’s country of tax residence. This required field on Form 1042-S is derived from the nationality (citizenship country) in the SAP record.

Slide 36

In Conclusion

Slide 37

Summary

Required information when hiring a non US citizen:Citizenship countryVisa typeOriginal US arrival date

Determination of correct tax residency status depends on this informationEnsures the non U.S. citizen is properly taxed

Slide 38

Resources - JHU Tax Office

JHU Tax Office is located on the Eastern Campus in Suite D200

Tax Office walk in hours – No appointment necessaryTuesday and Thursday afternoon 2:00 PM – 4:30 PMWednesday morning 9:00 AM – 12:00 PM

Web site address: http://www.controller.jhu.edu/depts/tax/index.html

E-mail address: Tax@jhu.edu

Telephone: 443-997-8688

Slide 39

Other Resources

JHU International Offices

JHMI Office of International Student, Faculty and Staff Services: http://www.hopkinsmedicine.org/intlsvcs/Homewood Office of International Student and Scholar Services: http://ww2.jhu.edu/isss/Carey Business School and School of Education One Stop Student Services Office: http://onestop.jhu.edu/international/Peabody Office of International Student Affairs: http://www.peabody.jhu.edu/116SAIS International Student and Scholar Services Office: http://www.sais-jhu.edu/students/international/office-information.htm

Slide 40

Other Resources (Cont)

Link to JHMI Office of International Student, Faculty and Staff Services Visa Chart: http://www.hopkinsmedicine.org/intlsvcs/visachart.pdf

HRSS web site address: http://ssc.jhu.edu/humanresources/index.html

Link to sample NRA Form W-4 on HRSS web site: http://ssc.jhu.edu/humanresources/DataFiles/taxform.pdf

Slide 41

We’re going to open the phone lines now!

There will be a slight pause, and then a recorded voice will provide instructions on how to ask questions over this conference call line.

We’ll be answering questions in the order that we receive them.

We’ll also be answering the questions that were emailed to us during the presentation.

If there’s a question that we can’t answer, we’ll do some research after this session, and then email the answer to all participants.

Q&A

Slide 42

Thank You!

Thank you for participating!We would love to hear from you.

Are there certain topics that you would like us to cover in future FastFacts sessions?Would you like to be a FastFacts presenter?Please email us at: fastfacts@jhu.edu

Slide 43

Survey

Before we close, please take the time to complete a short survey.Your feedback will help us as we plan future FastFacts sessions.Click this link to access the survey… http://connect.johnshopkins.edu/fastfactssurvey/

Thanks again!