1. NRA Tax & PeopleSoft Mary Fortier, NRA Tax Manager

2. Did You Know . . .
Maryland is ranked 11th state with most foreign students
13,439
12,887
(Open Doors Report, 2006 Fast Facts, Institute of International Education, retrieved 10/22/07 from

3. NRA Myths A one-time process It’s between the individual & IRS
Identify person & everything is done
It’s between the individual & IRS
Underwithholding reconciled through tax return
Some people are too “important”
Can’t subject them to the process
We have few foreign students & scholars
Few NRAs means will never be audited
NRA Office likes to be referred to as “N-Rat”

4. *National Rifle Association
NRA Facts
NRA population is an ever-changing group
Requires constant management
Withholding agent responsible for NRA tax withholding & reporting (not individual)
Agent incurs back tax withholding fees plus penalties & fines
IRS monitors the following:
Inconsistent tax reporting
Website information (events, speakers)
Omission of Taxpayer ID #
NRA* does not like others using this acronym
Might want to say Nonresident Alien Tax
*National Rifle Association

5. (Internal Revenue Service) TAX WITHHOLDING/REPORTING
NRA Scope
IMMIGRATION
(Dept. of Homeland Security & ICE)
Legal Work Authorization
AUDITS
(Federal & State)
Risk management
NRA TAX
I-9 PROCESS
(Department of Labor)
Within three days of hire
TAX ANALYSIS/MONITOR
(Internal Revenue Service)
All payments
TAX WITHHOLDING/REPORTING
Federal, FICA, State Laws
FAIR LABOR
STANDARDS ACT
Pay for work performed
TAXPAYER ID #
(Social Security Agency/ITIN Unit)
SSN or ITIN
TAX TREATIES
Monitor limits & Annual renewal

6. *Terms are all IRS categories and not immigration definitions
IRS Tax Categories* 1
US Citizen 2
Permanent Resident Alien 3
Resident Alien for Tax Purposes (RA) 4
Nonresident Alien for Tax Purposes (NRA)
Individual’s choice
Worldwide income taxed
NRA withholding formula
Not individual choice
Only US income taxed
*Terms are all IRS categories and not immigration definitions

7. IRS Income Types & Codes
Dependent Compensation – Employee (17, 18, 19)
Service/work required
Includes wages, salary, travel payments
Independent Compensation - Non-employee (16)
Includes consulting fees, guest speaker fees, honoraria, travel payments
Scholarships – Students (15)
No service or work required and may include independent educational activity
Includes tuition, room and board, stipend or living allowance, travel payment, books/supplies
Royalties (12)
Passive income
Miscellaneous (50)
No service required
Includes prizes and awards

8. IRS Required NRA Withholding
Employee - Single, 1, NRA*
NRA means that agents add a “non-cash” amount to total of wages paid
Total wages earned = $200 (Bi-weekly period)
Add $102 (IRS Publication 15, p. 14)
Withhold tax at $302 amount
Amounts differ based on type of payroll period
Independent Compensation – 30%*
Scholarships – 14%*
*Unless exempt by tax treaty

9. TU NRA Tax Systems Glacier Software (NRA Tax Office)
Tax analysis, NRA monitoring, tax treaty limits
PeopleSoft (Payroll & Bursar’s Office)
Tax status, tax withholding, payroll earnings
Central Payroll Bureau
POSC/payroll reports, tax reporting, SSN verification

10. How to Identify Tax Category
*Must ask question consistently to everyone
Individual Responsible
Question
Are you a
US Citizen or Permanent
Resident Alien?*
US Citizen
Permanent Resident Alien
Yes
Resident Alien for
Tax Purposes No
Immigration Status
Tax Analysis
NRA or RA
Nonresident Alien for Tax Purposes (NRA)
Withholding Agent Responsible

11. When to Identify Tax Category
Employees
Question part of I-9 process (Human Resources)
Complete Tax Residency Status Form
US Citizen
Permanent Resident Alien
N = Not indicated (Other)
If N, go to NRA Tax Office for tax analysis
Non-employees
Question on all payment forms (Accounts Payable)
If answered no, then paperwork sent to NRA Tax Office
Non-qualified Scholarships
Report 2x year (Bursar’s Office) requested by NRA Office

12. PeopleSoft – Coding Tax Status
Tax Status Codes
1 US Citizen
3 Permanent Resident Alien
5 Nonresident Alien for Tax Purposes
6 Resident Alien for Tax Purposes
N Not indicated
Blank
Enter in Citizenship Status Field
Path = Home > Build Community > Identification Data
> Use > Citizenship/Passport Data

13. PeopleSoft – Reports Run bi-weekly Payroll report
Monitor employees
Tax status of N, 5, 6
Tax Treaty Limits
FICA
Other taxes/issues
Social Security Number reports
SSN vs. ITINS
No number
Identify scholarship recipients
N, 5, & 6
Tuition, fees, scholarships, book grants

14. University Internal Audits
Maureen Higgins, CPA, MS Taxation
Internal Audit
University System of Maryland

15. Internal Audit Office
Conducts financial, operational, compliance, investigative, information systems, and follow-up reviews of the USM's institutions to ensure they are operating effectively, efficiently, and in accordance with applicable policies, standards, regulations, and laws.
Provides services to the Regents, the Chancellor and management to assist them in meeting their legal, fiduciary, and management responsibilities.

16. Internal Audit Function
Audit Process:
Assessing Risk
Selecting the Area to Audit
Conducting a Preliminary Survey
Evaluating the Control Environment
Performing the Audit Field Work
Issuing an Audit Report addressing Audit Issues and Recommendations

17. Common NRA Audit Areas Nonresident Alien: Employees Student Workers
Independent Contractors
Grants, Scholarships & Fellowships

18. Common NRA Audit Areas Determination of Tax Status “NRA”
Accuracy of NRA Withholding Tax
Timeliness of Tax Deposits
Documentation of Income Tax Treaty Benefits
FICA Withholding

19. Internal Controls Documentation & Records Retention
Policies & Procedures
Software Assistance or Manual Processes
Determining Tax Residency
Monitoring Treaty Benefits
Current Laws
Reporting necessary IRS Forms
Monitoring Immigration Changes
Reconciliations & Reviews
Training Personnel
Communication between Departments

20. Anticipate IRS Audits Statute of Limitations & Records Retention
Immigration and Tax Residency Documentation
Accuracy of Form W-4
Form 1042-S Supporting Documentation
Search for Unreported Transactions
Treaty Eligibility Support
Form W-8BEN
Form 8233

21. IRS Audits for NRA Tax Dave Foreman, Tax Manager
Office of the Comptroller
University System of Maryland

22. Comptroller’s Office Prepare financial statements & tax returns
Coordinate audit process of financials/grants
Facilitate IRS audits within USM system
Assess tax liability
Negotiate agreements with IRS
Assist in system-wide policy setting in financial matters

23. IRS Audit – CY 2001 The following payment types were reviewed:
Employees
Independent contractors
Scholarships/fellowships/grants

24. IRS Audits – Information Collection
CY 2001 following requested for respective payment type:
Immigration status
Copies of Form IAP-66/DS-2019
Date of entry into US
Service contracts
Copies of Forms 1042-S and W-2 issued
Copies of Tax Treaty Forms
Copies of Form W-4
Copies of Form W-9
Date of payment, check or voucher numbers & payment amount
Scholarship analysis documentation

25. IRS Findings – CY 2001
Rules lacking full compliance, especially employees
Need to:
Identify all aliens on Payroll
Document foreign origin & work authorization
Determine NRA vs. RA

26. IRS Findings – CY 2001 continued
Follow withholding rules for NRAs
NRA cannot write “Exempt” on W-4 (federal part)
“Single” filing status only allowed
May claim only 1 person exemption on W-4 (unless treaty exempt)
Need to back out standard deduction benefit (NRA)
Treaty benefit requires Form 8233 sent to IRS/5 days
If cannot secure W-4 as above, must withhold as “Single”, zero exemptions
Report treaty exempt wages on 1042-S; also on W-2

27. USM Future Objectives
Assess needs of USM institutions for NRA Tax support
Develop policies & procedures on USM level & for Internal Audit purposes
Create training tools & reference materials (manual) for institutions to use

28. QUESTIONS?