To establish 1042 processingfor non-resident aliens, use the Treaty/NR Alien Table component (TREATY_NR_ALIEN_TA),the Income Code Table component (INC_CD_1042_TABLE), and the ExemptionCode Table component (EXM_CD_1042_TABLE).
Page Name | Definition Name | Usage |
|---|---|---|
Income Code Table Page | INC_CD_1042_TABLE | (E&G) Set up theincome codes used for 1042–S processing. |
Exemption Code Table Page | EXM_CD_1042_TABLE | (E&G) Set up theexemption codes used for 1042–S processing. |
NR Alien Tax Treaty Table Page | TREATY_NRA_TABLE | (E&G) Set up therules associated with the treaties required for each country withwhich the U.S. has an agreement. |
Treaty/Non ResidentAlien Rpt Page | PRCSRUNCNTL | (E&G) Report oninformation from the Tax Treaty Table using Tax Treaty Table report(TAX720.SQR) |
The U.S. governmenthas entered into tax treaties with nearly 40 foreign jurisdictions.Income tax treaties coordinate the tax systems of the United Statesand other countries that are parties to treaties. Treaty provisionsaffect the taxation of non-resident aliens working in the U.S. Whiletax treaties are generally based on a standard model, each treatymight have slightly different provisions.
In addition to employeescovered by tax treaties, you must also report earnings on a 1042-Sform for some non-resident alien employees, such as those with specifictypes of earnings such as scholarships, fellowships, and grants.
Employee and EmployerRequirements
To claim benefits ofa treaty, an employee must have a visa and be a resident of one ofthe treaty countries. An employee can claim benefits of only one treatyat any given time. Employees who want to claim benefits under a taxtreaty must submit a written statement and applicable forms (W-4,Form 8233, Form 1001) to their employer.
As an employer, youmust apply the specific treaty rules when calculating federal withholdingtax. These rules often include time limits and earnings caps. Differenttypes of earnings, such as scholarships, grants, and fellowships,might be subject to different taxation rates. You must produce a Form1042-S and a 1042 summary form for each non-resident alien employeeaffected by the special withholding rates. If you file 250 or more1042-S forms, you must report on magnetic media. Earnings reportedon a 1042-S are not reported on a W-2; so, an employee may need botha W-2 and a 1042-S if some earnings are covered by the special taxtreaty rates and some are not.
Income Code andExemption Code Setup in Payroll for North America
Use the Income CodeTable page and the Exemption Code Table page to view income and exemptioncodes for IRS 1042–S reporting. Oracle delivers and maintains thevalues in these tables, which are updated only when the IRS changesthe value for an Income Code or Exemption Code. The most currenteffective-dated rows in each table reflect the correct IRS code valuesfor the current tax year.
Tax Treaty Setupin Payroll for North America
Use the NR Alien TaxTreaty Table page to capture the tax rates specified in tax treaties(including exempt earnings, which are recorded with a 0% tax rate).This table identifies those earnings subject to a 30% flat withholdingtax.
If you employ nonresidentaliens from countries that do not have a tax treaty with the U.S.,set up a record with NO TREATY as the treaty ID. You can either setup a record for each country that does not have a treaty, or one recordfor all countries without treaty. You must also identify these employeesas nonresident aliens on their federal tax data records.
Note: PeopleSoft re-deliversthe tax treaty table with each major version and, if required, withthe year-end Tax Update. If interim changes are required, you musttrack and apply the changes in your environment.
Related Links
Federal Tax Data Page
(E&G) Use the IncomeCode Table page (INC_CD_1042_TABLE) to set up the income codes usedfor 1042–S processing.
Navigation
Set Up HCM > Product Related > Payroll forNorth America > Federal/State Taxes > Income CodeTable > Income Code Table
Image: Income Code Tablepage
This example illustratesthe fields and controls on the Income Code Table page.
Field or Control | Definition |
|---|---|
| PeopleSoft Income Code | Displays the system’sunique identifier for the income code. This value does not alwaysmatch the IRS Income Code, which can change over time. |
| IRS Income Code | Displays the incomecode used by the IRS. This is the code that appears on pages and reportsthat reference the income code. |
(E&G) Use the ExemptionCode Table page (INC_CD_1042_TABLE) to set up the exemption codesused for 1042–S processing.
Set Up HCM > Product Related > Payroll forNorth America > Federal/State Taxes > Exemption CodeTable > Exemption Code Table
Image: Exemption Code Tablepage
This example illustratesthe fields and controls on the Exemption Code Table page.
Field or Control | Definition |
|---|---|
| PeopleSoft Exemption Code | Displays the system’sunique identifier for the exemption code. This value does not alwaysmatch the IRS Exemption Code, which can change over time. |
| IRS Exemption Code | Displays the exemptioncode used by the IRS. This is the code that appears in reports thatreference the exemption codes. |
(E&G) Use the NRAlien Tax Treaty Table page (TREATY_NRA_TABLE) to set up the rulesassociated with the treaties required for each country with whichthe U.S. has an agreement.
Navigation
Set Up HCM > Product Related > Payroll forNorth America > Federal/State Taxes > NR Alien TaxTreaty Table > NR Alien Tax Treaty Table
Image: NR Alien Tax TreatyTable page
This example illustratesthe fields and controls on the NR Alien (non-resident alien) Tax TreatyTable page.
Field or Control | Definition |
|---|---|
| Country | If you want to establishentries on the NR Alien Tax Treaty table that are applicable to morethan one country (for example, to use for all scholarship income thatis to be taxed at 30%, or for countries that do not have a treaty),you can use any value prefixed by a $ in the country code (for example, Country = $S). |
| Treaty ID | For countries that donot have a treaty agreement with the U.S., enter NO TREATY inthis field on the search page. |
| Allowances Permitted | For each tax treatyrecord you establish, specify the number of allowances permitted bythe treaty. The system issues anerror message when the employee's claimed allowance is over the maximumallowance permitted. For countries with notreaty, enter 1. |
| Income Code (for 1042-S) | Select each type ofearnings subject to special tax treatment under the treaty. Valuescome from the Income Code Table Page. |
| Max Earnings Eligible PerYear | Specify the earningscaps that apply for each earnings type. |
| Tax Rate After Form Received | Specify the taxationrates that apply for each earnings type. |
| Tax Rate Before Form Received | Specify the taxationrates that apply for each earnings type. |
Related Links
Federal Tax Data Page
