ALIEN MANUAL - TAX RULES AND REGULATIONS, SECTION D5

D5.0 OTHER TAX ISSUES

There are other tax issues that may pertain to non-citizens that need to be considered. The issues include social security tax, the open border policy, the "sailing permit" and the W-7 (ITIN) form.

D5.1 Social Security Tax (OASDI/Medicare)

History: The University became coordinated with Social Security in 1976. In 1991, the University established safe harbor participation in the DC Plan to comply with the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1990 (COBRA). COBRA required that employees of state and local governments be subject to FICA taxes unless they participated in an employer-sponsored retirement plan. This plan was set up for non-career employees and between July 1991 and October 1992 individuals were given the choice of contributing to the DC Plan or to OASDI. The option of choice was taken away and all non-career employees hired after October 1992 contributed to Safe Harbor. Individuals exempt from contributing to OASDI or Medicare are University students and nonresidents with F-1 or J-1 visas. Each type of exemption is further defined.

Section 3121(b)(19) or F-1/J-1 Exemption

In order to qualify for this exemption, the employee must be a nonresident, have an F-1, J-1, M-1, or Q-1 visa and be working to further the purpose for which the visa was issued. If a F-1, J-1, M-1, or Q-1 visa holder stays in the United States beyond a specified period, the Internal Revenue code (IRC) defines this person as resident for tax purposes and the compensation earned by this person becomes subject to the FICA tax withholding. If an individual does not qualify for exemption under these rules, they may be able to qualify under the student exemption.

Student Exemption

In 1995, the IRS clarified the student exemption. The exemption to FICA taxes applied to a student who "is enrolled in a "substantial course load" of study and the services performed are "incidental" to the course load of study".

The IRS has since issued new guidelines (Rev. Proc. 98-16) for determining FICA tax liability. Under the new guidelines, students who are enrolled "at least half time" will be exempt from Medicare and DCP Cas Sav deductions. The half time requirement at UCLA is 6 units. These changes were implemented effective with May 1998 earnings.

Remember, codes to calculate FICA tax are a part of an employee’s EDB record in the Personnel/Payroll System (PPS).  The system automatically derives these individual codes based on information from the Student Information System (SIS) and the Personnel/Payroll System (PPS).  SIS stores the number of registered units for each student and interfaces with the PPS various times during the year.  This insures that student employees are in compliance with IRS regulations. The FICA code is re-derived with each interface and taxes are deducted based upon the FICA code.  Refer to Section E3.3 for further information.

Questions regarding FICA issues should be directed to Payroll Services (Retirement/FICA).

D5.2 "Open Border Policy " and U.S. Territories

There exists between the United States, Canada and Mexico an "Open Border" policy which allows individuals from these countries to enter the other country without a visa. They ARE NOT allowed to be employed or reimbursed without proper documentation.

Individuals who are U.S. Nationals (Citizens of America Samoa or Northern Mariana Islander who have become U.S. Nationals) are entitled to the same exemptions as U.S. citizens but their marital status for tax purposes should be single.

D5.3 Sailing Permits

The IRS requires that all visiting aliens before departing the United States obtain a Certificate of Compliance. This is known as a Sailing Permit. In order to receive this permit, the alien visitor provides certain documents to an IRS office at least 2 weeks prior to leaving the U.S. The earliest the alien can apply for a sailing permit is 30 days prior to departure. With this documentation, an alien completes and files either a 1040-C or Form 2063 depending upon their situation. A signed copy of Form 1040-C or the detached copy from the Form 2063 is the sailing permit.

D5.3-1 Individuals exempt from Sailing Permit Requirement

The following individuals are exempt from obtaining a Sailing Permit.

  1. Representatives of foreign governments with diplomatic passports, members of their household and servants.

  2. Employees of international organizations and foreign governments and members of their households.

  3. Alien students, industrial trainees, and exchange visitors including their spouses and children who enter on F, H-3, H-4, or J visas only and who receive no income from U.S. sources while in the United States under those visas other than: allowances to cover expenses incident to study or training, value of services, food, and lodging connected with study or training, income from employment authorized by INS, or certain interest income.

  4. Alien students including their spouses and children who enter on M visas only and who receive no income from U.S. source other than: income from employment authorized by INS, or certain interest income.

  5. Other aliens who are temporary in the U.S. and receive no taxable income during the tax year such as: Alien military trainees, Alien visitors on a B-1, B-2, or B-1/B-2, Aliens who in transit (C-1 visa), Aliens who enter the U.S. on a border crossing identification card, and Alien resident of Canada or Mexico who commute between their country and the U.S. for employment.

At UCLA, the visitors that are required to obtain a sailing permit are the H-1, O, and P visa holders and the Permanent Resident status.

D5.3-2 Worksheet

The department of the departing alien should complete a Provisional Tax Statement - Worksheet and submit it to Payroll Services a least 1 month prior to departure and no earlier than 60 days. A blank worksheet is available on this website in Word format.

Provisional Tax Statement Worksheet

D5.3-3 How to Complete the Worksheet for a Sailing Permit

  1. Prepared by: Enter name of the person preparing the document

  2. Department: Enter the name of the department

  3. Ext.: Enter telephone number of person preparing worksheet

  4. Employee’s name: Name of the foreign individual

  5. Date leaving U.S.: Enter the date of departure from the U.S.

  6. Date leaving UCLA: Enter the date of departure from UCLA

  7. Date returning: Enter the return date if the trip abroad is temporary

  8. Reason for leaving: Enter the reason for departing the U.S.

  9. Alien status: Choose the appropriate field and complete statement

  10. Final month’s dates of presence: Enter the dates that the employee will be paid for during the final month.

  11. Final month’s earning calculation: Complete the calculation statement. Use the number of hours to be paid or the % of month to be to be paid and the final pay rate.

  12. Terminal vacation pay calculation: Complete the calculation statement. Use the hours accrued for vacation and the current pay rate.

  13. Signature: This is the department chair signature

  14. Signature: A second signature is needed when the employee is paid by two departments.

D5.3-4 Provisional Worksheet and Statement Example

Payroll Services will prepare a Provisional Tax Statement based upon a completed worksheet (see example below). A sheet of instructions that the visitor may find helpful in obtaining their Certificate of Compliance from the IRS will be included (see 5.3-5 below). Departments will be notified by Payroll when the statement has been completed and is ready for pickup.

Provisional Tax Statement Example (13598 bytes)

 

Provisional Tax Statement (W-2) (9322 bytes)

 

D5.3-5 Instructions for Obtaining Certificate of Compliance from the I.R.S.

UCLA Payroll
10920 Wilshire Blvd. #620
Los Angeles, CA 90024

As you requested, enclosed is a Provisional Tax Statement, covering payments made to you from January 1st of this year until the date of your departure from the United States.

You must appear in person at one of the addresses shown below at least two weeks before your planned departure (so that there will be enough time to handle any unexpected problems), but no earlier than 30 days before your departure. If your spouse is an alien and is also leaving the country, only one needs to appear with documents for both individuals, to obtain clearance for both.

You may need the following documents:

  1. Your passport and alien registration card or visa
  2. Copies of your U.S. income tax returns filed for the past 2 years. If you were in the U.S. for less than 2 years, bring the income tax returns you filed in that period.
  3. Receipts for income taxes paid on these returns.
  4. Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your return.
  5. A statement from each employer showing wages paid and tax withheld from January 1st of the current year to the date of departure if you were an employee.
  6. A profit and loss statement prepared for the period January 1st of the current year to the date of departure if you were self-employed.
  7. Proof of estimated tax payments for the past year and this year.
  8. Documents showing gain or loss from the sale of personal property, including capital assets and merchandise.
  9. Documents concerning scholarships or fellowships:
    • Copies of the application for, and approval of, the grant
    • Statement of the amount paid, and the duties and obligations under the grant and
    • List of any previous grant
  1. Documents indicating qualification for special tax treaty benefits.

If you have any questions about these instructions, please call Gayelea Allison at 794-8726. If you have any questions concerning the amounts listed on the provisional document, please call My Nguyen at 794-8737.

Addresses of local IRS offices:

Office of the Internal Revenue
300 N. Los Angeles Street
Los Angeles, CA

 

Office of the Internal Revenue Service
6230 Van Nuys Blvd Rm. 1004
Van Nuys, CA

Hours of Operation: Open Monday through Friday (except holidays)

8:00 am - 11:30 PM
12:30 PM - 4:30 PM

D5.4 Individual Taxpayer Identification Number (ITIN)

The IRS has announced that an new identification number is available for nonresidents. This number will be provided to foreign individuals required to have a taxpayer identification number for tax purposes but who are not eligible for Social Security numbers. The foreign visitor can apply for the ITIN using a new form, W-7.

IRS Form W-7

D5.4-1  Eligibility

Any individual who is not eligible for a Social Security number and is required to file a tax return must obtain a taxpayer identification number (ITIN).  In order for an alien individual to apply for a social security number, the alien must have documents from INS indicating work authorization (i.e., DS-2019, I-20, I-551, etc.)  Social Security Administration will issue cards to aliens not authorized to work if they are lawfully admitted to the US and need the number for a valid non-work reason (as determined by Social Security Administration).  The card will be marked to show that the individual can not work.  If the alien does work, the Social Security Administration is required to inform INS.

At UCLA, aliens that will be eligible to obtain the ITIN will be those who receive one time payments and tend to enter the US on B1, B2, WB, and WT status.

D5.4-2  Procedure to obtain a Taxpayer Identification Number (ITIN) at UCLA

  1. Arrange an appointment with the UCLA Acceptance Agent to complete and process the ITIN application.  The individual prior to his/her appointment will forward information and forms to the department for completion.

  2. On the day of the appointment, the visitor must present documents to show identity and legal admittance to the United States and complete the W-7 form.

  3. The Acceptance Agent finishes the process by reviewing the W-7 forms and submitting the forms to the IRS.  The ITIN will be forwarded to the individual when the Acceptance Agent receives it from the IRS.  This can take up to 4 weeks.

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