Betty's Section 14 International Payroll Flashcards
foreign students may be studying in the United States in one of three categories:
- F-1 Academic Student status
- J-1 Student Exchange Visitor status
- M-1 Technical Student status
Section 3121(b)(19) of the Code provides an exception from FICA tax for services performed by nonresident aliens temporarily in the United States in “F”, “J”, “M” or “Q” status for employment performed to carry out the purpose specified by the individual’s immigration status. (“Q” status individuals are cultural visitors.) This exception is called the NRA FICA Exception
have to have more than 5 calendar yrs since 1985
Form 8233
Exemption from tax on compensation for services is requested by eligible nonresident students
by presenting a completed and sign
ed Form 8233, Exemption from Withholding on Compensation
of a Nonresident Alien Individual accompanied by a statement certifying to the facts and
circumstances supporting the treaty claim
or
x Earned Income Exclusion (EIE) for U.S. citizens temporarily working outside U.S. =
$126,500, Housing $20,240
Aliens working in U.S. = Physical Presence test
183 days in last 3 years
x Totalization Agreements:
o Purpose is to prevent double SS/Med taxation
o Agreement provides that expatriate employees working “temporarily” in the foreign country
are subject to U.S. social security and Medicare taxes only
Non-resident aliens Form W-4 only option is single
Form 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
Withholding (equivalent of Form 941)
1042-S – Foreign Person’s U.S. Source Income Subject to Withholding (equivalent to Form
W-2)
Form 1042-T – Annual Summary and Transmittal of Forms 1042-S (equivalent to Form W-3)
x Form 2555 – form to claim bona fide resident status
Individual must be present in foreign country 330 days over 12 months to qulify for the foreign
earned income exclusion under physical presence test
x Penalty for knowingly hiring unauthorized aliens - $250 - $10,000 & potential criminal penalties; Penalty for late filing of Form 1042 is 5% to 25% of the unpaid tax
mmigrant Visas (“Green Cards”)
o Issued to foreign national entering the U.S. as lawful permanent residents or who become
lawful permanent residents
o An immigrant visa is an I-551 Permanent Resident Card, and provides both an identity
and authorization to work
Nonimmigrant Visas
o Issued to foreign national who wish to enter the US for a specific purpose, and will not be
in the country indefinitely
o Visa holders can work only for their sponsoring employer
Which of the following entities is a foreign country for purposes of qualifying for the §911 exclusions?
a. Puerto Rico
b. Mexico
c. Guam
d. Virgin Islands
b. Mexico
What is the maximum that a temporary foreign assignment can realistically be expected to last for purposes of excluding employee business expense reimbursements from income?
a. 3 months
b. 6 months
c. 9 months
d. 12 months
d. 12 months
Which of the following facts does not indicate the intent to meet the bona fide residence test?
a. Purchase of a home or signing a long-term lease in a foreign country
b. A temporary assignment of up to three months
c. Involvement in the cultural and social life of a foreign country
d. The type of visa or residence permit secured by the employee
b. A temporary assignment of up to three months
What form is filed to claim bona fide resident status?
a. Form 1042
b. Form 2442
c. Form 2555
d. Form 1116
c. Form 2555
Visa’s are
V,J,M,Q Subject to futa and taxes, B1 - Visitors for business, F1 - Students, J1 - Exchange visitors, M1 - Non academic vocaitonal students, Q1 - Cultural exchange visitors
- How many days must an individual be present in a foreign country over a 12-month period to qualify for the foreign earned income exclusion under the physical presence test?
a. 365 days
b. 330 days
c. 120 days
d. 90 days
330 days
- What percentage of the maximum foreign earned income exclusion is used to determine the base housing amount?
a. 14%
b. 16%
c. 18%
d. 30%
b. 16%
