UCSF Postdoc Scholars. Revised March 20, 2013

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1 UCSF Postdoc Scholars Revised March 20, 2013

2 Agenda Introduction Hiring Checklist Required Keying Practices Dues/Fees Taxation Financials Appendix: Taxation 2

3 Hiring Checklist Postdoc Scholars 3

4 Postdoc Hiring Checklist 1. Notice of Appointment (offer letter) signed by PI 2. UCSF Postdoc Acknowledgement of Receipt of Information Form (revised October, 2010). (All Postdocs) 3. Employment Eligibility Verification I-9 Form (All Postdocs) 4. Patent Acknowledgement and State Oath of Allegiance UPAY 585 Form (All Postdocs sign Patent section; only US citizens sign Oath) 5. Withholding Allowance Certificate (UC W-4/DE 4) (US Citizens) 6. Out-of State Withholding Form (UPAY 830) (All Postdocs) 4

5 Postdoc Hiring Checklist (p. 2) 7. State of Citizenship and Federal Tax Status (Non US Citizens) 8. Withholding Allowance Certificate-Non-Resident (UC W-4 NR/DE 4) (Non US Citizens) 9. Benefits Eligibility Level Indicator and Status Qualifier Code (UPAY 726) (All Postdocs) 10. Demographic Transmittal UPAY 5605 Form (All Postdocs) sent to payroll. 11. Deduction Authorization Form for Union Dues/Fees 5

6 Required Keying Practices Postdoc Scholars 6

7 Payments to Postdocs-OLD Payroll/Personnel System Postdoc Employees (TC 3252) Student Financial Aid Postdoc Fellows (TC 3253) External Source Postdoc Paid Directs (TC 3254) Inconsistent treatment/processes Difficult to do reporting Additional administrative effort 7

8 Payments to Postdocs-NEW Payroll/Personnel System Postdoc Employees (TC 3252) Postdoc Fellows (TC3253) External Source Postdoc Paid Directs (TC 3254) Consistency Consolidated payment source Decreased administrative effort 8

9 Payments to Fellows from PPS Employee Wages Does paying a postdoc fellow through PPS make him/her an employee? 9 Scholarship and fellowship grants given to an individual for study, training or research and which does not constitute compensation for personal services

10 Postdoc Titles & DOS Codes Payroll Title Title Code DOS Description Income Type Postdoc Employee 3252 REG Regular Pay Wages Postdoc Fellow 3253 FEN FEL Postdoc Paid Direct 3254 PDW PDE US Citizen & Permanent Resident Alien Nonresident Alien Postdoc without salary Monthly external pay Stipend: Scholarship Fellowship Training grant Paid by external source NO personal funds allowed 10

11 Postdoc Employee Funds are distributed via the payroll system (no change) Setup: Typ: 5 F/V: F RT: A Sch: MO Time: E LV: N DOS: REG 11

12 Postdoc Fellow Funds are now distributed via the payroll system Setup: Typ: 5 F/V: F RT: A Sch: MO Time: E LV: N Rate/Amt Dist %: Blank DOS: FEN: For Citizens and Resident Aliens 12 FEL: For Nonresident Aliens

13 Postdoc Fellow Benefits If the Fellow s benefits are to be paid from a funding source other than that designated for their stipend, a PDW distribution will need to be added. A PDW distribution is ONLY needed when you want to designate a different fund source to pay benefit expenses then what is being used to pay the stipend on FEN/FEL Only one PDW distribution line is permitted You will need to change the appointment rate code to A in order to add the PDW distribution Workers Compensation will still be assessed to the FEN/FEL distribution 13

14 Postdoc Fellow Benefits 14

15 Postdoc Scholar Paid Direct Employee receives their funding directly from an external source. No pay generated via the payroll system. Setup of their appointment includes a distribution to record the monthlyequivalent pay amount from an external source using DOS PDE and a distribution to fund their associated benefits on DOS PDW One appointment Typ: 5 F/V: F RT: A Sch: MO Time: E LV: N Two distributions L/A/C/F/P/S = Appropriate FAU Dist % = Blank Rate/Amt = PDW: Blank PDE: Monthly equivalent amount DOS = PDW and PDE 15

16 Postdoc Scholar Paid Direct 16

17 Postdoc Supplement Some Postdocs receive a supplement from University funds. The supplement is treated as wages Use REG when the supplement is required to meet the minimum base salary Use PDS when the supplement is above the minimum Appointment percentage should reflect percentage of total pay coming from each source (not to exceed 100%). Setup: 17 Appt 1-Postdoc Fellow or Paid Direct appointment Appt 2-Separate Postdoc Employee appointment to pay the supplement

18 Postdoc Supplement Example Appt 2 Appt 1 18

19 Transition for Postdoc Fellows Activity Date Fellow s last payment from stipend desk: April 1, 2011 Begin using FEN/FEL for Fellows April 6, 2011 New appointments for current Fellows must be setup in PPS by: April 25, :00PM Notice to Fellows mailed: April 15, 2011 Fellow s first payment from PPS : April 29, 2011 Discontinue sending hire documents to Student Accounts Determine if benefits will be paid from the same fund source as the stipend End current appointment/distributions for current Fellows effective 03/31/11 Create new appointment/distributions for current and new Fellows effective 04/01/11 Failure to setup a Fellow with a FEN/FEL distribution will result in the Fellow receiving no stipend payment 19

20 Dues & Agency Fees Postdoc Scholars 20

Dues/Fees Process Union dues and agency fees are deducted automatically for Postdoc Employees and Fellows Dues and fees are calculated based on the combined gross earnings from all pay sources

21 Dues/Fees Process Union dues and agency fees are deducted automatically for Postdoc Employees and Fellows Dues and fees are calculated based on the combined gross earnings from all pay sources Postdoc Paid Directs with a combo 3252 or 3253 appointment will have dues/fees deducted Postdoc Paid Directs with only a 3254 appointment will pay dues fees directly to the union Fellows are required to submit a written authorization form for dues/fees deduction 21

22 Benefits & Taxes Postdoc Scholars 22

23 Postdoc Benefits Benefits paid for by the University that are provided to Postdoc Fellows and Paid Directs and their dependents are subject to income tax. 23 Citizen & Resident Benefits are taxable and must be self reported to IRS and CA FTB The University is not required to report these payments to the IRS or withhold tax on the payments. Nonresident Alien The imputed income for benefits is reported on the Form 1042-S as non-qualified fellowship/scholarship The University is required to report these payments to the IRS and under some circumstances to withhold tax on the payments. Fellows will no longer be billed for required tax withholdings, deductions will be taken from the stipend payment.

24 Tax Treatment of Fellowship Stipend -Nonresident Aliens Federal tax withheld is based on the Postdoc s citizenship status and visa type as set up in PPS Nonresident aliens (NRA) paid on FEL Title Code Citizenship Code Visa Type Federal Tax Withholding Postdoc-Fellow (TC 3253) Nonresident Alien (N) J1 14% Postdoc-Fellow (TC 3253) Nonresident Alien (N) F1 14% Postdoc-Fellow (TC 3253) Nonresident Alien (N) All others 30% Postdoc-Fellow (TC 3253) Nonresident Alien (N) None 30% 24

25 Financials Postdoc Scholars 25

Month End Reporting Postdoc Fellow s stipend payments and deductions are part of the normal month end processing and will appear on the Distribution of Payroll Expense (DPE) FEN/FEL

26 Month End Reporting Postdoc Fellow s stipend payments and deductions are part of the normal month end processing and will appear on the Distribution of Payroll Expense (DPE) FEN/FEL gross earnings = stipend payment Benefits will include: PSBP Medical, Dental, Vision Worker s Comp, Unemployment Insurance and Broker/Admin Fees (where applicable) PSBP Life/AD&D 26

27 Expense Transfers Fellowship stipends will need to be transferred via the completion of a Payroll Expenditure Transfer (PET) Simplified - TS (UP773) In circumstances in which the benefit expenses cannot be transferred because there is no associated gross salary, expenses may be relocated by financial journal 27

28 The End Whom to contact: Payroll (keying questions): Tracy Lee, Postdoc Benefits Coordinator Postdoc Affairs (policy/contract questions): Christine Des Jarlais, Postdoc Affairs 28

29 Appendix: Taxation Postdoc Scholars 29

30 Withholding and Reporting Responsibility Two opportunities for taxation Tax treatment of fellowship stipend Tax treatment of postdoc health benefits Different rules for Employees, Fellows and Paid Directs Different rules for U.S. Citizen/Resident vs. Nonresident Alien and Resident of CA vs. Nonresident of CA 30

31 Tax Treatment of Fellowship Stipend The entire portion of the fellowship stipend for Postdoc Fellows is considered nonqualified Not required for either enrollment or attendance in a course of instruction Therefore, not excludable from gross income What does this mean to the Fellow? Must be reported by the recipient on his/her tax return The entire amount of the stipend is taxable 31

32 Tax Treatment of Fellowship Stipend -Citizens & Residents For the Postdoc Fellow, who is a citizen, pending permanent resident or resident alien, the University is not required to report or withhold tax on the fellowship stipend Citizenship codes: C Citizen R & F Resident Alien P Pending Permanent Resident Alien 32

33 Tax Treatment of Fellowship Stipend -Nonresident Aliens For the Postdoc Fellow who is a nonresident alien, the University must report fellowship payments on Form 1042-S, Foreign Person s U.S. Source Income Subject to Withholding The University must also withhold taxes unless the payment is excluded under one of the following exemptions: 33 The income is not U.S. source income The individual is covered by a tax treaty exemption

34 Tax Treatment of Fellowship Stipend -Nonresident Aliens Federal tax withheld is based on the Postdoc s citizenship status and visa type as set up in PPS Nonresident aliens (NRA) paid on FEL Title Code Citizenship Code Visa Type Federal Tax Withholding Postdoc-Fellow (TC 3253) Nonresident Alien (N) J1 14% Postdoc-Fellow (TC 3253) Nonresident Alien (N) F1 14% Postdoc-Fellow (TC 3253) Nonresident Alien (N) All others 30% Postdoc-Fellow (TC 3253) Nonresident Alien (N) None 30% 34

35 Tax Treatment of Fellowship Stipend -Resident/Nonresident of CA California does not distinguish between U.S. Citizens, Resident Aliens and Nonresident Aliens Nonresident of CA first year Subject withholding at 7%, reported on Form 592-B Resident of CA after first year No withholding, No reporting Recipient is required to self report 35

36 Postdoc Benefits Benefits paid for by the University that are provided to Postdoc Fellows and Paid Directs and their dependents are subject to income tax. Citizen & Resident Benefits are taxable and must be self reported to IRS and CA FTB The University is not required to report these payments to the IRS or withhold tax on the payments. Nonresident Alien The imputed income for benefits is reported on the Form 1042-S as non-qualified fellowship/scholarship 36

37 Imputed Income for Benefits (cont) Nonresident Alien The University must also withhold taxes unless the payment is excluded under a tax treaty exemption If no tax treaty exemption is provided: PPS calculates the imputed income related to the medical, dental, and vision contributions paid by the University. The Payroll office will withhold tax on the imputed income and report the income and withholding on a Form 1042-S. Such withholding will be taken from the stipend payments made to the Postdoc Fellow. Postdoc Paid Directs will be billed for this withholding, since their stipends are not paid by the University 37

38 Imputed Income for Benefits (cont) State taxes No state withholding is required The value of the benefits is reportable on a Form 592-B for any nonresident of California Withholding and Reporting Summary Postdoc Subject to Deductions for: Benefits Paid by the University Reported on: Federal State Federal State Postdoc-Pay Direct-Citizen/PR No No Postdoc-Pay Direct -NRA Yes No 1042-S 592-B Postdoc-Fellow-Citizen/PR No No Postdoc-Fellow-NRA Yes No 1042-S 592-B Postdoc-Employee-Citizen/PR No No Postdoc-Employee-NRA No No

Non-Resident Alien Fellowship/Scholarship Payments and Taxes Monthly Reporting Process. Service Request 16938

Non-Resident Alien Fellowship/Scholarship Payments and Taxes Monthly Reporting Process Service Request 16938 University of California Office of the President Payroll Coordination and Tax Services Revised