Payroll For US Citizens and Resident Aliens Working Abroad Section 14 Welcome to the Triad Chapter APA 2016 Study Group Saturday, March 19, 2016

Payroll For US Citizens and Resident Aliens Working Abroad This section objectives: o Review Federal Income Tax Withholding Rules for US Citizens and Resident Aliens Working Abroad o Review Social Security and Medicare Tax Rules fro US Citizens and Resident Aliens Working Abroad o Define the Foreign Earned Income and Housing Cost Exclusions o Define US Income Tax Treaties o Determine the Status of Resident/Non Resident Aliens o Review Federal Income Tax Withholding Rule for Resident Aliens o Review SS and Medicare tax rules for Nonresident Aliens o Indentify various types of Visas

Payroll For US Citizens and Resident Aliens Working Abroad Federal Income Tax Withholding – US Employers must withhold unless one of these exemptions apply Foreign earned income or housing cost exclusion Wages subject to Foreign Income tax withholding Wages for work in the US possessions other than Puerto Rico Wages for work in Puerto Rico

Payroll For US Citizens and Resident Aliens Working Abroad Social Security and Medicare Taxes – In general wages paid to US Citizens and resident aliens working abroad for a US employer are subject to withholding – Totalization Agreements To alleviate the burden of double Social Security taxation – Foreign affiliate coverage elections

Payroll For US Citizens and Resident Aliens Working Abroad Federal Unemployment Tax – Employment by US Citizens working abroad for a US employer is covered if the work performed would be covered in the US – Does not apply to resident aliens working abroad or to American employees of Foreign Affiliates

Payroll For US Citizens and Resident Aliens Working Abroad Foreign Earned Income and Housing Cost Exclusions – US Citizens and resident alien employees working outside the US who qualify can exclude the first $100,800 of foreign earned income – Foreign tax home

Payroll For US Citizens and Resident Aliens Working Abroad Foreign Earned Income and Housing Cost Exclusions – Bona Fide residence test Depends on several Factors Whether employee brings their Family Purchase of a home or signing a long term lease Involvement in the culture and social life of the foreign country Terms of the employment agreement Type of Visa or residence permit secured by the employer

Payroll For US Citizens and Resident Aliens Working Abroad Foreign Earned Income and Housing Exclusions – Physical presence test – Foreign earned income exclusion Up to $100,300 of foreign income may be excluded – Foreign earned income – Determining the source of earned income

Payroll For US Citizens and Resident Aliens Working Abroad Foreign Earned Income and Housing Exclusions – Determining US Income vs. Foreign Income – Number of days worked in the US x Total Income = – US Source Income Total number of days – Example 40 days worked in US X Salary $ total days worked = $14,560

Payroll For US Citizens and Resident Aliens Working Abroad Foreign Housing Cost Exclusion – Employees who qualify under bona fide or physical presence test can take exclusion for reasonable expenses – Reasonable expenses do not include: Lavish or extravagant expenses under the circumstances Telephone and digital cable Deductible interest and taxes Capital expenditures such as a house, home improvements or furniture Cost of domestic labor ( Maids, butlers, Gardeners, Etc)

Payroll For US Citizens and Resident Aliens Working Abroad Base Housing Amount – 16% of the maximum foreign earned income exclusion, figured on a daily basis – For 2015, it would be a maximum of ($100,800 x 16%) $16,128 – Formula for calculating the Foreign housing cost exclusion = reasonable housing expenses – base housing amount

Payroll For US Citizens and Resident Aliens Working Abroad US Income Tax Treaties – Possible treaty benefits Personal service income Professors and teachers Students, trainees and apprentices Tax credit provisions Tax saving clauses

Payroll For US Citizens and Resident Aliens Working Abroad Employer Tax Reimbursement Policies – Tax protection Plans – Tax Equalization plans – Hypothetical taxes Employer must determine tax the employee would have paid if the Employee had remained in the US

Payroll For US Citizens and Resident Aliens Working Abroad Determining Resident/Nonresident Alien Status – Qualify as residents by meeting one of the tests – Lawful permanent resident or “Green Card” test – Substantial presence test Federal income tax withholding and employment taxes for Resident Aliens Federal income tax for Non Resident Aliens – Subject to same federal Income tax withholding requirements as other employee for all income from US sources

Payroll For US Citizens and Resident Aliens Working Abroad Resident and Nonresident Aliens Working in US Federal Income Tax Withholding for Non-resident aliens – US Source Income – Tax Treaty exemptions – Foreign Students receiving scholarships or fellowships Scholarships or fellowships granted to non resident alien student to cover tuition and related expenses are exempt Students must be degreed candidates in the US as nonimmigrants under the following Visas………………..

Payroll For US Citizens and Resident Aliens Working Abroad Immigrant Visas – Green Cards (I-551) Nonimmigrant Types of Visas – B1 = Visitors for business – D-1= Foreign Crewmen – E-1= Treaty Traders – E-2 = Investors – E-3 = Specialty Occupations – F-1 = Students

Payroll For US Citizens and Resident Aliens Working Abroad Nonimmigrant Types of Visas – H-1B = Specialty workers – J-1 = Exchange Visitors – L-1(A/B)= Intracompany transfers – M-1=Non academic or vocational students – O-1 and O-2= Extraordinary ability – P-1 = Entertainers – Q = Cultural Exchange Visitor – R-1 = Religious occupations

Payroll For US Citizens and Resident Aliens Working Abroad Resident and Nonresident Aliens Working in US Social Security and Medicare taxes for Nonresident Aliens – These taxes generally apply to all wages for work in the US with these exceptions Nonresident alien students Agricultural workers Work performed on foreign ships or planes Work performed for a foreign government International organizations Totalization Agreements

Payroll For US Citizens and Resident Aliens Working Abroad Resident and Nonresident Aliens Working in US Federal Unemployment Tax for Nonresident Aliens – Generally FUTA applies to all wages paid for work performed in the US – Wages earned by nonresident agricultural workers temporarily in the US under H Visa are exempt from FUTA

Payroll For US Citizens and Resident Aliens Working Abroad Types of Visas – Immigrant visas – Nonimmigrant visas

Payroll For US Citizens and Resident Aliens Working Abroad Thank you for attending this presentation. I wish you the best of luck on your FPC or CPP testing Contact – Kathy Fearrington, CPP – Krispy Kreme Doughnut Corporation – or