Requirements Definitions Form 1042-S 2001 Service Request 14859

Transcription

1 Requirements Definitions Form 1042-S 2001 Service Request University of California Payroll Coordination Final -January 14, 2002

2 Requirements for Forms 1042-S Table of Contents Section Page I. Overview 1 II. Effective Date 1 III. Requested Changes or Reporting of Income? 1 IV. Substitute Form 1042-S 2 V. Magnetic Media 3 VI. Year-End Reporting Process 4 VII. Blank 1042-S 4 VIII S Microfiche 4 IX. Other 4 X. Attachments 1. Publication IRC section Instructions for Form 1042-S 4. IRB Substitute Form 1042-S 6. Explanation of Codes 7. Foreign Country Code Table

3 I. Overview The purpose of this document is to request modifications to the Form 1042-S (Foreign Person s U.S. Source Income Subject to Withholding) Reporting File process for the 2001 tax year. II. Effective Date The required changes must be in place in time for the production of the 2001 reporting of Form 1042-S. III. Changes to the Reporting of Income and the Rate of Tax Beginning with the 2001tax year, withholding agents are required to report gross income paid and Federal and State taxes withheld in different formats according to the following reporting methods: Magnetic Media The instructions for filing the Form 1042-S magnetically/electronically requires that gross income paid and Federal and State taxes withheld be entered in whole dollars only; (i.e., no cents). Attachment 1 contains a copy of the Specifications for Filing Form 1042-S, Foreign Person s U.S. Source Income Subject to Withholding, Magnetically or Electronically (Publication 1187). Therefore, base system programs that produce the magnetic/electronic media must be modified to report the amounts in whole dollars. The system should use the methodology described in Internal Revenue Code (IRC) section IRC section 6102 prescribes that fractional parts of a dollar shall be disregarded unless it amounts to one-half dollar or more. If the fractional part is one-half dollar or more, then the amount should be increased to a whole dollar. For example, if the amount is $4, the amount should be raised to $4, If the amount is $4,256.49, the amount should be reported as $4, Attachment 2 contains a copy of the IRC section Paper Form 1042-S There are no changes required to Form 1042-S to report Gross Income, Federal and State taxes withheld. That is, these amounts should be reported in dollar and cents. For informational purposes, attachment 3 contains a copy of the 2001 Instructions for Form S. Page 1

4 Rate of Tax Currently, the rate of tax is displayed as two digits (e.g., 30) for 30%). The 1042-S reporting file programs should be modified so that the rate of tax is displayed in the following format: two digits, a decimal, and two digits (e.g., for 30%). If the tax rate is less than 10%, enter a 0 (zero) before the tax rate (e.g., enter for 4%). However, if the income the Exemption Code is 4, Exempt under treaty, enter 0 (zero). (Please note that the zero tax rate was previously displayed as 00 ). IV. Substitute Form 1042-S The Internal Revenue Service (IRS) has substantially changed the format of the stock Form 1042-S for the tax year Withholding agents who file paper Form 1042-S are no longer permitted to use multiple income lines on Copy A, which is filed with the IRS. These withholding agents must report different types of income for an individual using a separate Form 1042-S. Although, the University does not submit a payer Copy A to the IRS, the Internal Revenue Bulletin (IRB) (Substitute Printed, Computer-Prepared, and Computer-Generated Tax Forms and Schedules) allows for multiple lines of income to be displayed on the recipient and withholding agents copies. Therefore, UCOP decided to produce a substitute form that displays more than one line of income in boxes 1 through 8 as a convenience to these nonresident aliens receiving more than one type of income from the University. The IRB provides that the withholding agent may choose the format, design, color, and quality of the paper used for substitute forms. However, all boxes and appropriate captions appearing on the official form must be present on the substitute form. Attachment 4 contains a copy of the IRB Attachment 5 contains a copy of the substitute Form 1042-S. Additionally, the IRS has updated the Explanation of Codes that is displayed on the back of the Form S copies B & C. Attachment 6 contains a copy of the Explanation of Codes. The Instructions for Form 1042-S require that the EIN caption box (9) for Withholding Agent s and U.S. TIN caption box (14) be checked (a) or marked (0) in some manner. Therefore, base system programs that produce the Form 1042-S must also be modified to always check or mark the Withholding agent s EIN (box 9). If the individual has an ITIN or SSN the Recipient s U.S. TIN (box 14) must be checked or marked. If individuals do not have San SN displayed on their data base record (EDB0111) and no SSN or ITIN is displayed on the AP file, the caption box should not be checked or marked. The form layout below includes all boxes on the Form 1042-S and existing descriptions new boxes, changes and descriptions are shown in bold Italics.) Page 2

5 Box Number & Name EDB Element Description 1: Income Code 1170/1171 Enter appropriate 2-digit income code. 2: Gross Income 5537/5538 Enter the actual gross income paid during the calendar year (dollars and cents). 3: Withholding Allowances AP This box should only be completed if the income code reported in box 1 is 15 (scholarship or fellowship grants) or 16 (compensation for independent personal services). This amount is entered in dollars and cents. If the Income Code is other than 15 & 16, enter blanks. 4: Net Income AP Complete this box only if you entered an amount in box 3. (Subtract the withholding allowances from the Gross Income Paid and enter the net amount in dollars & cents). 5: Tax Rate AP PR (derived) 6: Exemption Code 7: U.S. Federal Tax Withheld 8: Amount repaid to recipient 9: Withholding Agent s (EIN) 10: Withholding Agent s name and address (including Zip code) 11: Recipient s account number (optional) AP PR (derived) AP Contains the rate of tax that applies to the income in box 2. The rate of tax is applicable to AP payments only; (The Tax Rate for payroll payments should be reflected as 0 (zero). Enter the rate using the following format: two digits, a decimal, and two digits (e.g., for 30%. However, if the Exemption code is 4 exempt from tax under a tax treaty, enter 0 (zero). If the tax rate is less than10%, enter a 0 (zero) before the tax rate (e.g., enter for 4%. If the rate of tax entered in Box 5 (Tax rate) is 0 (zero), the Exemption Code Box 6 for payroll individuals must continue to be set to the numeric value of 4 (Exempt under tax treaty). If the rate of tax entered in box 5 is between 1% (01.00 and 30% (30.00) enter 00 in box 6. If the rate of tax entered in box 5 is 31% (31.00) or higher, leave box 6 blank. If exemption code 01 is used, the recipient s taxpayer identification number must be entered in box 14. If the recipient s taxpayer identification number is unknown or unavailable, you must withhold tax at the rate of 30% (30.00) and enter 00 in box 6. Enter the total amount of U.S. Federal tax actually withheld. If no tax has been withheld, enter 0 (zero). Box 7 must contain a value in all cases, even if no tax has actually been withheld. This box should be left blank. Enter the campus Taxpayer Identification Number (TIN). Campuses must supply the Withholding Agent s Taxpayer Identification Number immediately prior to the production of the Form 1042-S Forms (As is presently done in providing UC s address within the W-2 process.) The EIN caption box must be checked (a) or marked (0) in some manner. Campuses must supply the Withholding Agent s name, address, and Zip code immediately prior to the production of the Form 1042-S Forms (As is presently done in providing UC s address within the W-2 process.) Enter the Employee ID number (if available). Page 3

6 Box Number & Name 12:Recipient Code 13: Recipient s Name and Address 14: Recipient s U.S. TIN, if any (check box SSN, ITIN, EIN, or QI- EIN 15: Recipient s Country of residence for tax purposes 16: Recipient s Country Code 17-20: NonQualified Intermediary s (NQI s/flow- Though Entity s name 21:Payer s Name and ITIN (if different from withholding agent s) 22: State income tax withheld 23: Payer s state tax no. EDB Element AP PR Derived 0105, 0204, 0205, 0206, 0207, 0208, 0209, 1118, 1119, 1120, 0143 Description Contains the Recipient Code. Enter the complete name of the recipient and address, town, province or state, and country (including postal code). For addresses within the U.S., enter the address in the following order: street address (number, street, apartment number, or rural route), city or town, state, and zip code. Use the Postal Service 2-letter abbreviation for the State name. Do not enter United States or U.S Enter the recipient s U.S. Taxpayer ID. The SSN or ITIN caption box should be checked (a) or marked (0) in some manner) Translated from the Country Code Table Enter the literal translation of the recipient s country of residence for tax purposes Enter the two-digit Country Code. These boxes are not relevant to the University and should be left blank. This box should be left blank This box should be left blank This box should be left blank. 24: Name of state 0207 Enter the two-digit state code. V. Magnetic/Electronic Media The IRS has substantially updated the specifications for filing Form 1042-S, magnetically or electronically. IRS Publication 1187 lists all of the changes made to the magnetic and electronic media. Attached is a magnetic tape layout displaying the changes. However, a summary of changes to the record layout fields is listed below: The record layout and record sequence have changed. The Reconciliation C Record was added and the End of Transmission F Record has replaced the Y Record. A file will consist of records in the following sequence: Page 4

7 Transmitter T Record Withholding Agent W Record Recipient Q Record(s) Reconciliation C Record End of Transmission F Record Multiple sets of the Withholding Agent W Record, the Recipient Q Record(s), and the Reconciliation C Record may be included within the file in that sequence. However, the file must contain only one Transmitter T Record (at the beginning of the file) and one End of Transmission F Record (at the end of the file). The record length has changed to 780 fixed positions. Block size must not exceed 23,400 tape positions. Both the Withholding Agent W and the Recipient Q record contain a field titled Return Type Indicator. Campuses will have to identify whether the record is Original, Void, or Corrected prior to submission. The values are: 0 (Zero) = Original 1 = Void 2 = Corrected The gross income amounts and Federal and State taxes withheld must be in whole dollars. A Reconciliation C Record has been added to summarize the number of Q Records and income amounts reported in the Recipient Q Records for a specific Withholding Agent W Record. The final record on a file has been changed to End of Transmission F Record. VI. Year-End Reporting Process There is no change to the current year-end reporting process. VII. Blank 1042-S Currently, a locally defined number of forms are printed at the end of the normal 1042-S print process with fixed campus data information (Employer Name, Address, Zip Code, and Employer I.D. numbers. Campuses should have the ability to request blank copies of the new substitute form. Additionally, the EIN box within the Withholding agent s box # 9 should be checked (a) or marked (0) on the blank forms.) VIII S Microfiche There is no change to microfiche process. IX. Other Foreign Country Code Table Page 5

8 The Foreign Country Code Table 26 should be updated with recently added country codes or description changes. Attachment 7 contains a copy of the Foreign Country Table (UPAY737) displaying the new values. X. Attachments Magnetic Tape Layout Publication 1187 IRC section S Instructions IRB Substitute Form 1042-S Explanation of Codes Foreign Country Code Table 26 Page 6