22)What are the purposes of the reports produced during month-end processing dealing with the foreign national tax status? Do I have to make any corrections or is everything automatically updated for me?
The month end TAX TREATY PROGRAM AUDIT REPORT (produced by BP8024) consists of the following two parts:
(1) EMPLOYEES WHO MAY LOSE TREATY BENEFITS This report is designed to identify those individuals who are about to lose their foreign national tax exemption due to some change in their tax status, such as:
Exceeding limits on the maximum presence test, or;
Exceeding the lifetime maximum earnings limitations. You MUST change the FIT deduction code located on the Federal Tax Screen (102) in the Personnel Maintenance for these employees to Y before the first payroll of the following month is calculated.
The employee may also become ineligible for treaty benefits when their title code or visa type change. For instance, students moving to a teaching position may not claim benefits from student treaties (income code 19) any longer.
Those that are eligible, as teachers or researchers, you must change their income code to 18 in order to claim benefits under the current treaty code. Individuals in this category are still tax-exempt under the new rule.
Otherwise, the FIT deduction code should be a Y so that taxes will be withheld.
Students with an F1 visa in practical training may use both types of treaty. No change is necessary for them to continue their exempt status. The student will continue to show up as an error during this practical training period.
(2) EMPLOYEES WHO MAY EXCEED THE ANNUAL MAXIMUM EARNINGS
This report is designed to identify foreign nationals currently claiming benefits under certain tax treaties that have annual maximum income levels. The payroll calculation program automatically withholds taxes from earnings when the earnings exceed the maximum allowed entered on the current W4 on file. The report will produce a list identifying those employees whose year-to-date earnings are about to exceed the treaty maximums in the following pay period. This report also generates labels so that these individuals can be notified before any taxes are withheld.
Do NOT change their FIT deduct code from F to Y because this condition is temporary and the employee will again be eligible for benefits at the start of the new calendar year, given that the employee files the necessary tax exemption form before the mid-November cutoff date.
Leaving the FIT deduct code set to F also insures that the employee will be included in the notification process for re-filing IRS form 8233; claiming exemption for the next year. Exemption Forms are processed at the end of each calendar year.
You MUST update the exemption date on Screen 102 in Personnel Maintenance to reflect the date that the new Form 8233 was received.
This page was last updated on 06/11/2010 17:15:18