Tax Withholding Overview

Purpose

This document describes an overview of tax withholding and responsibilities.

Background

Two types of tax withholdings are processed by the Research Foundation:

Backup Withholding

When the RF pays miscellaneous income payments to independent contractors, rent recipients, royalty recipients, or participant stipend recipients, we are required to solicit and obtain a valid taxpayer identification number (TIN) from the individual. IRS rules state that if we pay the individual and have not obtained the TIN, we must withhold and remit Backup Withholding tax (see Current Backup Withholding Tax Rates). Therefore, RF policy states that payment must not be processed and a supplier hold must be applied until the proper documentation has been obtained. For more information, see Taxpayer Identification Number Rules for Miscellaneous Income Payments.

Residency Status for Tax Purposes

Residency status determination is for tax purposes only and is not related to an individual’s immigration status. Once the residency status is determined, the status must be entered into The RF business application. This determination and monitoring guidelines are detailed in the procedures Classifying Aliens as Residents or Nonresidents for Tax Purposes and Monitor Residency Determination for Tax Purposes.

Social Security and Medicare Taxation

Social Security and Medicare tax withholdings are based on the employees' student status or residency status for tax purposes and visa status for non-U.S. citizens.

Social Security and Medicare taxation is a government tax on employees only, and the tax is withheld as designated by tax law each calendar year. (See Social Security and Medicare Tax Rates and Wage Bases.)

The taxation and exemption rules for Social Security and Medicare are separate and distinct from income tax rules. Once the employee’s Social Security taxation or exemption is determined, the status must be entered into the RF Oracle business application. Review for any status changes may also be required based on the individual’s circumstances. See Social Security and Medicare Taxation for more information on Social Security and Medicare taxes and exemptions, and see Enter an Employee Record for instructions on entering tax or exemptions information into the RF Oracle business application.

Important: In connection with the residency determination for tax purposes, the IRS may require retroactive Social Security and Medicare tax withholdings if an individual’s status changes from a Nonresident Alien to a Resident Alien during the calendar year. See Classifying Aliens as Residents or Nonresident Aliens for Tax Purposes and Social Security and Medicare Taxation for further details.

Income Taxation

Income tax withholdings are calculated based on the following information about the individual:

Change History

 

 

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