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by: Johnpaul Bradtke


Johnpaul Bradtke
GPA 3.55


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Class Notes
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This 57 page Class Notes was uploaded by Johnpaul Bradtke on Friday September 4, 2015. The Class Notes belongs to SPAN 0035 at University of California - Los Angeles taught by Staff in Fall. Since its upload, it has received 113 views. For similar materials see /class/177793/span-0035-university-of-california-los-angeles in Spanish at University of California - Los Angeles.

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Date Created: 09/04/15
TO DAY39S AG E N DA 0 What does Classifying amp Sourcing mean 0 Why are Classifying amp Sourcing important 0 How does Classifying amp Sourcing relate to income for NRA 0 Review of various payment categories oDefine and describe each payment oSource the income oAppropriate payment Venue r ocumentation for each payment What does Classifying amp Sourcing Mean MerriamWebster DEFINITIONS Classify to assign to a category Source a point of origin or procurement w 3 Why are Classifying amp Sourcing Important It is the basis in which income is taxed A NRA for tax purposes is subject to US tax on US sourced income 4 We Classify payments because ALL Qayments are considered taxable unless excluded by law 1 Foreign Sourced 2 Internal Revenue Code 3 Income Tax Treaty Various Payments UC Pays to NRA SERVICE NON SERVICE 0 Compensation 0 Travel Wages Salaries Benefits Pens39ons FringeHealth o Prizes 0 Awards o Awards P ze o Reimbursements o FellowshipSChOlarShiP Royaities Service portion of FS o Stipend 39 I75 0 Visa Fees 0 Rents o Honorarium UCLA39s Process for Various Payment DEPARTMENTS FELLOWSHIP WAGESSALARY One Time Payments SCHOLARSHIP Lecture Fee 2 Process pavmens to smdens 3 Reloca on Costs H onorariu ms ROLL 1 Prooess Pav to Empioyees thhho d Taxes Repdtt Paw ne tst ex es TRAVEL OFFICE Process NoneEmpwovee Pavments Indudes student trave a PAC A Bruin Buy Statements A lt 2 W 7 Informational Statement YEAR Em FORMS w2 and1042s 1099 d 5923 Statement 10425 for BAR 81 AP Summary of Sourcing Rules for Income TYPE of INCOME SOURCE DETERMINED by Pay for personal services Where senices are performed Business Income Sale of inventow purchased Sale of inventow produced Where Sold Allocation Dividends Type of corporation US or foreign Interest Residence of payer uX Rents Where property is located Royalties Patents Copyrights Etc Where property is used Royalties Natural resources Where property is located Pension due to personal services performed Where senices were performed while a nonresident aie Scholarships and fellowship grants Generally residence of payer For more informafion and excepfions To The above rules refer To IRS Publicafion 515 8 dVquot EMPLOYMENT DEFINITIONS 0 Employee A person who is hired by another person or usiness for a wage fixed payment or consideration in kind in exchange for personal services and who does not provide the services as part of an independent business 0 Em lo er someone who can control what will Be gone and how it will be done 0 Remuneration payment for services that an individua performs or carries out as an employee Postdoc benefits CarsLease CLASSIFYING EMPLOYMENT AS INCOME Wages Salaries Commissions Fees Tips Insurance Benefits Allowances and Reimbursements Fringe Benefits Back pay Awards Bonuses and Awards Death Benefits Settlements IRS Code Exclusions Foreign Employer 0 Sec 872b3 Compensation paid by foreign employer to a nonresident alien individual Sec 893 Compensation of employees of foreign governments or international organizations Diplomats Sec 125 Cafeteria Plans 0 Sec 162 Ordinary Business Expenses IRS SEC 125 CAFETERIA PLAN No amount shall be included in the gross income of a participant in a cafeteria plan This allows the employer contributions for health dental and vision benefits to be excluded from gross income Exception includes PostDoctoral Scholars 3252 3253 and 3254 14 IRS Federal Income Tax Treaty Exclusion country that allows either a reduced rate of withholdings or exemption from federal withholding tax Tax treaties for wages recognized at UCLA are 0 Employment Income Code 18 0 Student Employment Income Code 19 1 l 15 WAGE PAYMENTS AT UCLA Personnel Payroll System PPS Wage payments are recorded and paid EmployeelEmgloyer Relationship Departments may only enter individuals on the PPS whose relationship with the University has been determined to be employeeemployer in nature This includes without salary appointments through PPS at UCLA UC Merced and UCOP 16 Only the following categories shoul be entered on PPS as Without Salary Functioning like an employee but WOS Emeritus Status approved by the Chancellor s Office 0 Clinicians offers services in exchange for the UCLA s labs etc Visiting Titles approved by Academic Personnel Post Doc Titles DOS code PDW 3253 Post Doc Fellow Recipient 3254 Post Doc Paid Direct Affiliates Orthopedic Hospital Ceres Inc Martin L King Jr C Medical Center Harbor UCLA Research and Education Martin L King Drew Hospital MLK Cedars Sinai Medical Center Los Angeles Biomedical Institute Oliveview Hospital Employment vs NonEmploymen IRS assumes that all payments made for services are to employees Departments are responsible for defining the work individuals will be paid for and properly classifying them as employees or independent contractors Departments are required to apply guidelines from Business and Finance Bulletin 77 in order to make a correct dtermination L 9 A California Senate Bill 1467 Applies state agency conflict of paid as an Independent Contractor hired as an Independent Contractor interest guidelines and penalties to UC Prohibits Current UC Employees to be Restricts Former UC Employees being SOURCING WAGES EMPLOYEES Payments for personal services SW sourced by the location of the activit US Sourced Income Wages and other compensation for services performed in the United States are considered to be from sources in the United States CA Sourced Income Wages paid to an NRA while in California is considered CA sourced Foreign Sourced Income Wages and other compensation for services performed OUTSIDE the United States are considered to be foreign sourced 21 Web site Business amp Finance Bulletin 77 Independent Contractor Guidelines Guidelines to assist departments in classifying an individual s status as it relates to employment Includes an independent pre hire worksheet It is assumed that a department is applying the principals of Bus 77 every time a non employment payment is made Payments over 5000 0 must complete an independent pre hire worksheet wwwucopeduucophomepoliciesbfg 22 Types of NonEmployee Payments to NRA s Tax Definitions 0 Honorariuman award granted in recognition of a special serVIce or dlstlnguished achievement It is not predetermi It is a gift object code 7900 0 Lecture feea payment for a one time lecture or a series of lectures that occur in a span of two weeks or less Object code 3345 0 Performance feeis made to an individual or group for rofessiona services not directly related to an academic unction object code 3307 o Royaltya payment made for the use of property especially Iv a patent or copyrIghted work object code 3480 uc Press on 0 Consulting Fee a fee to one who gives professional advice or serVIces genera ly conSIdered an expert In theIr fleld object code 3455 Other non employee payments include Awards Prizes FellowshipScholarship Death Payments Travel Reimbursements and Visa Fees 23 Sourcing Payment Payments for personal service are sourced by location of activity Foreign Sou rced 2 California Amounts paid to a nonresident of CA for servic performed outside of CA are not California sourced 1 Federal Amounts paid to a nonresident for services performed outside of US are foreign sourced They are not subject to taxation or reporting US Sou rced 1 Federal Amounts paid to a nonresident for services performed in the US are US sourced and subject to taxation 1 California Amounts paid to a nonresident of CA for services performed in CA are California sourced Please note that an independent contractor is paid for TOTAL work which includes preparation 24 IRS Federal Income Tax Treaty Exclusion An agreement between the US and another country that allows for a reduced rate or an exemption of federal tax withholding Recognized Tax treaties for non employee payments at UCLA include 0 Independent and Personnel Services Income Code 16 25 26 Prizes and Awards Two Categories 1 Prizes which are in the nature of a ScholarshipFellowship SF Funds are to be used to defray the expenses of study training or research 2 Prizes not in the nature of a SF Funds are given as recognition for some sort of special achievement special skillknowledge or an award won in a contest 27 Prizes and Awards WHICH SYSTEM PROCESSES TH PRIZE 0R AWARD If the award is classified as a fellowship then the award should be processed through the student Billing and Accounts Receivable System BAR If the award is classified as a merit award then the award could be processed through PPS Bruin Buy or BAR depending on the relationship the recipient has with UCLA 28 SOURCING INCOME Prizes and Awards A Payments are sourced by the location 0 the activity that merits the award Activity performed in the United States is considered to be from sources in the United States Activity performed outside the United States is considered to be 1 isquot foreign sourced 29 Prizes and Awards Dependent upon the country that the recipient is from and the article from the country s treaty 30 31 Reimbursements DEFINITION To pay back or compensate another party for money spent or losses incurred 4 32 Reimbursements are created in Express and then processed by the Bruin Buy system 4 33 Reimbursements SOURCING OF INCOME Generally not required if payment meets the conditions under the accountable plan rule 4 34 Types of Reimbursable Expens per UC Policy I Travel Expense Business and Finance G28 Express I Relocation Expense Business and Finance G13 Payroll Bruin Buy I Visa Fees 35 TE 2 lt2quot ml ltwheim u c A l Reimbursements of Travel Expense Exclusion From Income Payments made to the purpose of defraying or reimbursing the deductible travel and lodging expenses of such nonresident alien individuals are excludible from the gross income of such nonresident alien individuals and are not reportable to the IRS by the payers of such payments on the condition that the requirements of the accountable plan rules are met The requirements of the accountable plan a rules are found in Treasury Regulation 1622 36 36 IRS SEC 162 ACCOUNTABLE PLAN RULE Requirement of Payee 1 Establish the business purpose and connection of the expenses 2 Substantiate the expenses claimed to the payer within a reasonable period of time and Return any amounts to the payer which are over and above the substantiated business expenses within a reasonable period of time 37 Reimbursement of Relocation Expense Recruitment Not Taxable Paid through Expres House hunting All taxable Paid through EDB Moving of household goods Travel Travel to New Job oTransportation COSt Not Taxable Paid through Express oLodging Not Taxable Paid through Express oMeals All taxable Paid through EDB Temporary Living Expense All Taxable Goes Through PR as MOV 38 Reimbursement of Visa Fees If the foreign nationals employment is vital to further the University s mission then visa fees may be reimbursable Alpha type visas not taxable income and the fee is paid through Accounts Payable Permanent Resident may be taxable Depends on what the employee does for UCLA 39 40 Royalties DEFINITION A payment for the right to use or the privilege of using in the United States an intangible property such as patents copyrights secret processesformulas goodwill trademarks franchises and similar property 41 4 Royalties Royalty payments are always paid through Accounts Payable Bruin Buy System 42 Royalt39 39 s A Sourcing of income Royalties A royalty payment is sourced by it s typ 1 For use of natural resource it is wher the property is located 2 For use of copyright etc it is where the property is used Royalties are payments for the we of or for the privilege of using in the United States intangible property Such as patents copyrights Secret proceSSes and formulas goodwill trademarks franchiSes and similar property Royalties Industrial royalties Income Code 10 Copyright Royalties Income Code 12 Under certain tax treaties different rates may apply to royalties for information concerning industrial commercial and scientific expertise 44 45 ScholarshipFellowship DEFINITION For tax purposes a scholarship or fellowship may be defined as any amount paid to an individual quotfor the purpose of aiding his study training or researchquot and which does not represent compensation for personal services 46 MOST SCHOLARSHIPFELLOWSHI PAYMENTS AT UCLA 1 Are paid through the Billing Account Payable System 2 Some are paid through Bruin Buy because the recipient is not a student or PostDoc of UCLA 47 ScholarshipFellowship THE AWARD CAN BE MADE UP OF 4 Compensation Payroll Requires a service to receive Qualified Award BAR Books tuition and required fees NonQualified Award Living expenses travel grant 3 W if 1 if U753 I ii 1 exam 48 The award requires Joe to work in the lab 30 hours per week for 2 years The value is 10000 Compensation Employment Examle of Scholarshi Fe110wshi 0 gig 10000 on a W 2 reported on W2 15000 for tuition books and required fees Qualified Award ScholarshipFellowship 0 excluded 5000 for living expenses or stipend Unqualified Award ScholarshipFellowship 5000 on a 1042s Q 49 ScholarshipsFellowships Income in the form of a scholarship or fellowship is treated in one of three ways 1 EXCLUDABLE under the Internal Revenue Code this is called the Section 117 exclusion 2 EXEMPT by treaty must file Form WBBEN with the educational institution 3 TAXABLE 1430 depending on visa status 50 ScholarshipsFellowships IRC Sec 117 Scholarships Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization 51 ScholarshipsFelIowships SOU RCING Scholarships fellowship grants grants prizes and awards are sourced by the residence of the payer Scholarships fellowship grants and awards paid to a nonresident alien for activities performed outside the U S is foreign d Further explanation 1 Payments for research or study in the U 8 made a U 8 organization are US sourced 2 Payments from a foreign government or foreign corporation are foreign sourced payments even though the funds may be disbursed through a US agent 52 ScholarshipsFellowships SOURCING cont Location of Activity Type of us 39QutxbLULS Income Compensation US Sourced Foreign Sourced Scholarship Fellowship US Sourcedquot Foreign Sourced 53 54 Pensions DEFINITION Regular payments made to retired people and to some widows and disabled people either by the state or from an investment fund 4 Pensions Payments are administered and paid by UCOP and Fidelity 4 56 I T Pensions i sou RCING W A pension earned for services performed inthe United States is US sourced income A pension earned for services performed outside the United States is Foreign Sourced AA J 57


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