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					  Introduction to US Tax
Reimbursement Procedures
   at The United Nations
      Income Tax Unit
      Accounts Division
      9 February 2010

                          1
Objective: To Familiarize
Staff Members with UN
    Tax Procedures
  This presentation is NOT intended
  to replace the Information Circular
            ST/IC/2010/10


                                        2
      Outline of Presentation

• General information
• Cycle of U.N. Tax Reimbursements
• Tax Advances
• Self Employment Tax for US Citizens
• Tax Settlement
• Foreign Earned Income Exclusion

                                        3
        The Income Tax Unit
 Serves over 6,500 staff members in
  respect of US income tax obligations

 Provides information and responds to
  queries related to UN taxable earnings,
  UN tax reimbursements and advances

 Isprohibited from providing tax advise and
  completing tax returns for staff members
                                            4
                          Services
   Internet: www.un.org/tax
       Links to tax authorities web sites
       UN Information Circular & Forms
       UNJSPF (Pension Fund) – Guide to national taxation
 Email: tax@un.org
 Telephone & walk-in inquiries:
       212-963-2949
       FF Building 3rd Floor (Client Service Area); 304 East 45 St.
       Hours: 1 Apr – 15 April 2010: 9 a.m. – 5 p.m.
       All other times: Mon., Tues., Thurs., Friday: 1 p.m. – 4 p.m.
                       Wednesday: 9:30 a.m. – 4 p.m.
   Fax: 212-963-1544
                                                                 5
                Important Deadlines
                Deadlines for      IRS & State 2009       IRS & State
   Status       submission to          Tax Filing          2009 Tax
                U.N. Tax Unit          Due Date          Payment Due
                                                             Date


Staff Working   1 March 2010         15 April 2010*      15 April 2010
 in the USA


Staff Working    1 April 2010         15 June 2010       15 April 2010
outside USA                        (reflects automatic
                                  2 months extension)

 *Extension does NOT extend payment due dates.
                                                                     6
    Who is subject to US taxes on
            UN earnings

•   US citizens
    •   even if your official UN nationality is different

•   US permanent residents / holders of US
    work permits / refugees who have signed
    the waiver of privileges & immunities
    •   See ST/IC/2004/31 for more details

                                                            7
            Waiver of Privileges and
                  Immunities
 •   Staff members MUST obtain approval
     from OHRM in writing before signing the
     waiver
 •   Waiver form: to be signed in your Human
     Resources Office
     When: Within 10 Days of the later of:
     (i) Receiving Notice for Permanent Residence, or
     (ii) Effective Date of Employment with the UN
NOTE: Permanent residents who have not signed the waiver of
privileges and immunities are NOT eligible for UN tax reimbursements.
                                                                        8
                      Background
 US   Tax Laws
     UN staff who are subject to US income taxes must
      pay taxes and file tax returns in compliance with US
      tax laws:
       • Federal, State & local income taxes
       • Self-Employment tax (U.S. citizens only)
 Tax   Reimbursement System:
     Purpose: To achieve equality among tax-paying &
      non-tax-paying staff members
     Thereby reimbursing staff members for income
      taxes payable on UN earnings
     Reimburses employer component of Self-
      Employment tax                                9
             Staff Assessment
   NOT withholding tax and NOT related to the actual
    US income tax payable by an individual staff
    member
   Difference between gross and net salaries
   Deduction is made regardless of a staff member’s
    nationality or tax status
   CANNOT be reimbursed to staff members under
    any circumstance
   CANNOT be claimed as a deduction on US tax
    returns
                                                  10
                  Filing requirements
   To receive tax reimbursement checks from the UN
    before 15 April 2010 filing date, submit the following to
    the Tax Unit by U.N. submission deadline, 1 March
    2010, using the checklist (U.N. form F.247) included
    on page 37 of ST/IC/2010/10:
       True, correct and complete copies of tax returns filed / to be
        filed with tax authorities including copy of the UN statement
        of taxable earnings
       Request for settlement of income taxes (F.65)
       Supplementary information to form 65 (F.65/A) for staff
        members serving overseas
       Consent Form (F.243)
   Your tax return is subject to verification by the UN
                                                                 11
  Filing requirements (Continued)
 Avoid common mistakes:
     Date format on the consent form (F. 243) is
      MM/DD/YYYY and MUST be numerical:
       • 06/15/2010 Imprinted on the form  OK
       • June 15, 2010, or 15/06/2010  WRONG
     Incomplete/missing forms and/or schedules
     Missing signatures on tax returns
     Incorrect calculations on tax returns
     Did not inform Tax Unit of change in organization,
      agency or duty station
     Incorrect e-mail or home/mailing address        12
Cycle of U.N. Tax Reimbursements
> New U.S. staff members who join the U.N., or staff
  members who are U.S. permanent residents and just
  signed the Waiver request estimated tax advances from
  the Income Tax Unit by completing the U.N. form F.65
 Income Tax Unit calculates and issues tax advance
  checks payable to tax authorities quarterly for eligible
  staff members, and issues quarterly statement of tax
  advances to staff members via e-mail
 Income Tax Unit will communicate to staff members on
  enrollment with EFTPS for direct deposits




                                                         13
Cycle of U.N. Tax Reimbursements
            (Continued)
 Income Tax Unit issues Statement of Taxable
  Earnings to all U.S. taxpaying staff members by
  end of January via e-mail
 Staff members submit copies of their signed tax
  returns, U.N. forms F.65, F.65/A if applicable
  and F.243 to Income Tax Unit to request for tax
  reimbursements and following year’s estimated
  tax advances
 The cycle repeats


                                                    14
        Estimated Tax Advances
 The UN   does not have tax withholding system
 Staff members subject to income taxes are
  required by law to pay quarterly estimated taxes
  to tax authorities as follows:
     90% of current year (2010) estimated taxes, OR
     100% of previous year (2009) tax liabilities
        calculate and issue the estimated taxes
 UN will
 on UN income upon request based on
 information on completed U.N. form F-65:
                                                       15
  Estimated Tax Advances (Continued)
     Estimated federal, NY State/NY City, DC, MD or VA
      income tax liabilities on UN income, and
     UN portion of Self Employment tax
 Staff members     who are U.S. citizens are
  responsible to pay IRS their share of Self-
  Employment tax on quarterly basis
 Eligibility for advances:
     Staff members have > 6 months contract with UN
     Staff members under WAE contract are not eligible
              with Income Tax Unit to get tax
 File form F.65
 advances paid to the tax authorities      16
           Estimated Tax Advances
                 (Continued)
 Must inform Income Tax      Unit immediately upon:
     Employment
     Significant changes in UN earnings
     Separation/Special leave without pay
     Change in agency
     Reappointment
     Change in marital status / dependents
     Leaving for / Returning from overseas assignment
     Signing the waiver (US permanent resident)
     Becoming US citizen/G-4 visa holder
                                                    17
               UN Earnings &
         Self Employment (SE) Tax
 For income tax purpose, UN earnings are
  treated as wages, not as business income
 Who is liable for SE taxes?
       US citizen working in US must pay full SE Tax on UN
        Earnings
       UN will reimburse half of SE Tax on UN earnings as
        calculated on IRS schedule SE
       US citizen working overseas is exempt
   What about US permanent residents?
       US permanent residents are exempt from SE tax on
        UN earnings

                                                           18
     Enrollment with EFTPS
 Staff members   who receive UN advance
 payments in the form of checks will
 receive e-mail notification from the Income
 Tax Unit to complete the EFTPS
 enrollment form 9783T and return it to the
 Unit for enrollment. If the enrollment is
 successful, the UN will issue subsequent
 tax advance payments to the tax
 authorities via direct deposits
                                           19
Enrollment with EFTPS (Cont’d)
 Staff members  who are liable to pay self-
 employment tax are encouraged to enroll
 with the IRS Electronic Federal Tax
 Payment System (EFTPS) for their
 quarterly share of self-employment tax and
 other tax payments to the IRS, available
 online at the website: www.eftps.gov, and
 make arrangement through their
 respective financial institutions
                                          20
      Settlement of Income Taxes
 Upon receipt ofthe tax claim, Tax Unit
 calculates your UN tax reimbursement:
     • Difference between Tax with UN income and Tax without
       UN income (see Information Circular par. 26 – 27)
     • If UN 2009 tax liability > 2009 advances, UN will issue
       checks payable to tax authorities (discussed later)
     • If UN 2009 tax liability < 2009 advances, U.N. will recover
       overpayment from your 2010 advances if you are active
       staff member (discussed later)
     • The reimbursement cannot exceed the actual income
       taxes payable to the tax authorities

                                                             21
        Settlement of Income Taxes
               (Continued)
 What if   you submit your Tax Return late?

     UN is NOT liable for Penalties & Interest levied by
      tax authorities
     2010 tax advance payments by the UN will be
      delayed
     2009 tax advances will be deducted from salary if
      return is not submitted by 15 Sept. 2010
     No reimbursement if submitted after 1 year from
      filing due dates to tax authorities
                                                       22
         Payment of Income Taxes
 What you     should be aware:
     Need to pay your portion of Self Employment tax
     You are liable for taxes on non-UN earnings
     If married and receive spousal allowance/benefit,
      must file joint return
     If receive dependency allowance/benefit, must
      claim all dependents on tax returns (unless written
      justification provided)
     Can file separate if no spousal allowance received
     You may be subject to alternative minimum tax
                                                      23
         Payment of Income Taxes
              (Continued)
 Obligation to   minimize tax liability
     Must use larger of standard / itemized deductions
     If both husband and wife work with the U.N. and are
      both U.S. taxpayers, they must file jointly
     Must claim all available tax credits




                                                     24
          Spouse with G4 Visa
 If your   spouse holds a G4 visa
     you may use the filing status of “married filing
      jointly”, if he/she has a social security number
      or individual taxpayer identification number
      (ITIN)
     The UN earnings of the G4 visa holder are not
      subject to US income tax
     Refer to IRS Publication 519 “US Tax Guide
      for Aliens”

                                                    25
                   UN Statement of
                   Taxable Earnings
 Common issues:
     Did not receive it due to:
       • Missing/Incorrect nationality, visa status on Personnel
         Action
       • Wrong e-mail address or mailing address
       • Change of overseas assignment
       • Change of organization / agency / department
 Tips:
     Verify items 9 (“Nationalities), 10 (“Visa status“)
      and 11 (“Date of waiver“) for correctness when
      you receive a copy of your Personnel Action.
                                                               26
                Sample Tax Case
   Additional payment due:
       Actual tax on UN income for 2009:     $16,000
       Estimated UN tax paid for 2009    :    (15,000)_
       Balance of taxes                      $ 1,000
 You will receive a tax settlement check of $1,000
  payable to the tax authority
 Mail the check to appropriate tax authority upon
  receipt of the check. If you pay the balance due
  already, return the U.N. check to Tax Unit with proof
  of payment for re-issuance to your name.
                                                           27
      Sample Tax Case (Continued)
 Overpayment of        taxes
     Actual tax on 2009 UN income:              $16,000
     Estimated tax paid by UN for 2009:         ( 18,000)
     Overpayment (O/P) of taxes by UN           $ 2,000
 Recommended action:
     Active staff member should apply UN overpayment
      amount to 2010 estimated tax,
       • Form 1040, line 74 (Federal)
       • IT-201, line 79 or IT-203, line 69 (NY state),
       • For substantial overpayments, staff member asks for
         refund from tax authorities and remit to the UN     28
                    Interest & Penalties
 UN will NOT pay any late filing penalties under ANY
  circumstances
 Will ONLY reimburse late / underpayment interest and
  penalties:
       Due to delays/incorrect information acknowledged as UN’s
        responsibility
       For staff member serving overseas (up to 15 June filing
        deadline)
       Underpayment of tax advances by UN :
         •   Contract < 6 Months
         •   WAE contract
         •   Separated Staff
         •   Staff Members serving overseas
   Refer to the Information Circular, paragraph 21          29
    Foreign Earned Income Exclusion
 If qualified, can exclude earned income up to the
  maximum of $91,400.
 Eligibility:
       Tax home test (see publication 54) AND
       Bona fide residence test: must have established Bona fide
        residency in the foreign country for an uninterrupted period
        including a full tax year, or
       Physical Presence Test: must be out of US for 330 full
        days during any period of 365 consecutive days, within
        2008, 2009 and/or 2010.
   Reference:
       publication 54 “Tax guide for US citizens …”           30

				
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