Questions & Answers

Question: What do I need to declare as income? Stipends, travel grants, fellowships, loans?
Answer: Loans are not income, so no taxes on it. There may be a tax benefit when you pay the interest on the loan.
Fellowships are income, and you report the income on the wages line and add it to any w-2 income you receive. This income is not subject to social security taxes.
Stipends are income and you will either receive a w-2 (wages) or a 1099-misc (contract work is self-employment requiring Schedule C and Schedule SE).
Travel grants could be income or not. Contact the grant administrator to see if your particular travel grant will be reported to IRS as W-2 (wages), 1099-misc (contract work) or reimbursement of expenses (not reportable to IRS as income).

Question: What part of fellowship income is tax exempt?
Answer: Fellowship income is reported the same as w-2 wages, but is not subject to social security. In the same way as w-2 wages, your standard deduction and personal exemption amounts are not taxable. For a 2006 tax return, if you are single and can claim your own personal exemption, then your standard deduction is $5150 and your personal exemption is $3300. If your income (from all sources) is greater than your standard deduction, then you are required to file a tax return… even if you do not owe taxes. You may find your fellowship income on a W-2 or on a 1098-T, depending on the administration of the fellowship.

Question: If I do not receive a W-2 for internship Stipend income, can I assume the income is not taxable?
Answer: I would assume that you did not receive your mail. Call the administrator for the stipend and verify that no W-2 was sent. Because some stipends are not taxable, you need to verify with the source to determine the tax reportable status of this money.

Question: How do I report fellowship income if I have no Social Security number? I came to this country in September, got a fellowship and now have to file a tax return.
Answer: Complete your tax return and report your fellowship on the W-2 wages line. Complete a W-7P request for a taxpayer ID. Mail these together to IRS. They will process the request for a taxpayer ID and then process your tax return.

Question: How do I report income from more than one state? How do I become a California resident?
Answer: IRS does not care what state you reside in. So for your federal tax return, just combine your income (w-2 wages).

MexDer News

MexDer News

Two minute lockout
MexDer nominated by FOW as "The Emerging Exchange of the year" Awards 2007 Award ceremony
IOMA 2007 hosted by MexDer video
MexDer ranking #5 in the World according to FIA 2006
FIA Annual Volume 2006
On December 18 MexDer will carry out the delisting of the IPC options, the migration and listing of the IPC Options on Futures Contracts.
Mutual Funds are authorized to trade Derivatives by the National Banking and Securities Commission (CNBV) and the Central Bank of Mexico in December 2006
Modifications to the Federal Income Tax Regulation authorize private pension funds to use derivatives for hedging, October 3, 2006.

Filters for Volume and Price Changes for entering orders
Mexican Insurance Companies and Bonding Institutions may use derivatives products for the first time on MexDer. As published in the Official Gazette of the Federation on Circulars F-7.3 and S-11.4, respectively
Net capital rules for Banks will increase trading on derivatives by reducing the equity capital cost making net positions possible between organized exchanges and over the counter markets. As published in the Official Gazette of the Federation.
Important Tax news
The Federal Income Tax Regulation (Art. 199) eliminates the withholding of the income tax to residents from abroad on TIIE (Interbank Interest Rate) Derivatives and Derivative securities issued by the Federal Government traded on MexDer. 23/Dec/2005
Euro / MXN Peso Futures Contract at MexDer
Global Accounts are approved in MexDer, view a summary of the main modifications.
MexDer is ranked fifth place world-wide in trading volume of futures contracts by the end of 2004. View the statistics published by the Futures Industry Association



CONSULT MARKET VIEW

Backup Withholding

Backup Withholding (28%) for Payments to U.S. Tax Residents

Prepared by: Jose A. Carus, Jr. (Tax Compliance Manager)
Prepare Date: 05/02/08
What is Backup Withholding and When should you withhold the 28% Backup Withholding from a payment made to a U.S. Tax Resident
What is Backup Withholding?
Government entities that make certain payments are required to withhold income tax of 28% from these payments if the payee is not exempt from backup withholding and fails to furnish correct taxpayer identification number (TIN). Backup withholding does not apply to wages or pension payments.
You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN).
"Missing" Taxpayer Identification Number
A taxpayer identification number is considered "missing" whenever (1) the TIN is not provided, (2) the TIN has more or less than nine digits, or (3) the TIN includes an alpha character in one or more of its nine positions.
This withholding is referred to as "Backup Withholding." IRS Publication 15 provides additional information regarding which payments are subject to backup withholding.
Payments that may be subject to backup withholding include interest, dividends, rents, royalties, nonemployee compensation, and certain other payments including broker and barter exchange transactions.

How to Complete the PIR when 28% Backup Withholding is required
Complete the Payment to Individual Report (PIR)
In the Purpose of Payment box enter the reason for withholding the 28% backup withholding. For example, "Payment recipient refused to provide an SSN."
In the box with the words Wisconsin Department of Revenue please cross out the words Wisconsin Department of Revenue and enter the words University of Wisconsin System (Vendor # 507013).
Process the PIR using the normal UW procedures.
Once the PIR has all the required approvals please forward it directly to:
Jose A. Carus, Jr.
Tax Compliance Manager
21 North Park Street, Suite 6101
Madison, WI 53715

U.S. INCOME TAX INFORMATION

U.S. INCOME TAX INFORMATION
TAX FACTS FOR US CITIZENS LIVING ABROAD, 2005
Who must file a return? Any US citizen (throughout this fact sheet the term US citizen includes both citizens and US resident aliens) who has worldwide income in excess of the sum of his or her standard deduction and personal exemption must file a return annually. For 2005 the standard deduction amounts for most people are $10,000 (married filing jointly), $5,000 (single or married filing separately), and $7,300 (head of household). The personal exemption amount is $3,200 for each taxpayer and dependent.
When is my tax return due? US citizens have an automatic extension to June 15 if their residence address is overseas on April 17, 2006. For overseas residents who must file tax returns for calendar year 2005, returns are due by June 15, 2006. However, any amounts owed must still be paid on or before April 17, 2006. The automatic extension applies only to filing the return; it does not affect the due date of any money owed. An international postmark by these dates counts as timely filed, so long at the postmark date is clearly legible.
What form should I file? As the foreign earned income exclusion can only be claimed on a Form 1040, US citizens overseas will normally file a Form 1040. Do not file a Form 1040A or Form 1040EZ if you have income earned from working overseas.
How do I claim the foreign earned income exclusion? To claim either the foreign earned income exclusion or the foreign housing exclusion, you must complete either Form 2555 or Form 2555EZ. The Form 2555EZ should only be used if you were a full year resident overseas with earned income of less than $80,000. If you were an overseas resident for only a part of the year, if you earned more than $80,000, or if you are claiming a foreign housing exclusion, file Form 2555.

What is the maximum foreign earned income exclusion? The maximum exclusion amount for 2004 and future years is $80,000, with possible inflation adjustments for tax years 2006 and later. Each individual taxpayer may claim the exclusion. Thus, a married couple when both work can each claim up to the exclusion limit for the income they earn. If both spouses are employed overseas and both earn $80,000 or more in 2004 the maximum earned income exclusion is $160,000. If one spouse earns more than $80,000 and the other earns less the exclusion may not be "shared." The spouse earning more than $80,000 will have taxable earned income equal to the excess of earned income over $80,000; the spouse earning less than $80,000 will be able to exclude only the amount earned as an individual.
May I claim both the foreign earned income exclusion and the foreign housing exclusion? Yes, if your earned income exceeds the foreign earned income exclusion limit ($80,000 single, $160,000 joint in 2004). To the extent your total foreign housing costs exceed 16 percent of the annual salary of a GS14, Step 1, US government employee, those excess costs may be excluded. Fortunately, the Internal Revenue Service provides the daily rate, which will be approximately $11,700 for tax year 2005. If rent, local housing or real estate tax, common area fees, utilities, etc., exceed this amount the excess amount may be excluded from income.

Where can I get more guidance on filing requirements for US citizens resident overseas? Internal Revenue Service Publication 54, "Tax Guide for U.S. Citizens and Resident Aliens Abroad" has more detailed information. You may also go to the IRS web site, http://www.irs.gov/.
If I want professional help in preparing my return whom may I consult? TieCare has a relationship with Global Tax Service, which provides expert tax preparation services for US citizens or resident aliens residing overseas. E-mail Rick Gray, CPA, at tiecare01@cs.com.

Tax Laws

Income Tax Laws
S.R.O. 600(I)/91, dated 02-07-1991. In exercise of the powers conferred by clause (c) of subsection
(4) of section 50 of the Income Tax Ordinance, 1979 (XXXI of 1979), and in suppression
of its Notification No. 707(I)/80, dated 26th June, 1980, the Central Board of Revenue is pleased
to specify the special rate specified in the table below for deduction of advance tax under the said
sub-section in respect of the payments specified in the table.
Table
Payment Rate
(i) Payments on account of supply of raw hides and skins One per cent.
(ii) Payments on account of supply of cotton lint. One per cent.
(iii) Payments on account of supply of raw wool. Two per cent.
(iv) Payments on account of transportation of goods through
goods transport vehicles.
One per cent.
(v) Payments on account of supply of rice. One per cent.
(vi) ----------------------- ------------
(vii) Payments on account of supply of motor vehicles to
Government Department and Corporations.
0.75 per cent.
(viii) Payments on account of supply of iron and steel items like
M.S. bars, angle iron, tee iron and girgers, received by
suppliers of these items which are not manufactured by them.
1.25 per cent.
(ix) Payments on account of Modaraba transactions made by a
Modaraba or an Investment Bank.
One per cent.
2. This notification shall have effect from the first day of July, 1991.
{C. No. ITJI-1 (7)/84 Vol-II.}
{Note: In the Table, after entry (vi), a new entry (vii) was added vide SRO 551(I)/92, dated 02-06-
1992 and shall have effect for the assessment year 1991-92 only. Netry (viii) was added vide
SRO 895(I)/92, dated 15-09-1992 and shall be deemed to have effect from the 9th August, 1992,
and shall remain valid till 30th June, 1993.}
{Note : In the Table, after entry at serial number (viii), a new entry (ix) was added vide SRO
181(I)/93, dated 02-03-1993 and that entry (ix) was substituted vide SRO 413(I)/94 dated 29-05-
1994}
{Note : In the table, entry (vi) was omitted vide SRO 629(I)/94 dated 27-06-1994 and shall have
effect from the first day of July, 1994.}
Deduction of tax at source:
(1) Any reason responsible for paying any income chargeable under the head “Salary” shall,
at average rate of tax computed at the rates specified in the First Schedule on the
estimated income of the assessor under this head for the financial year in which the
payment is made after making such adjustment, as may be necessary, for any excess
deduction or deficiency arising out of any previous deduction or failure to make such
deduction during the said financial year.
Deduction of tax at source (On supply of Cotton Lint etc.)
Notwithstanding anything contained in this Ordinance:
(a)Any person responsible for making any payment in full or in part (including a payment by way
of an advance) to any person being resident (hereinafter referred to respectively as “payer” and
recipient”), on account of supply of goods or for service rendered to, or the execution of a contract
with the Government, or a local authority, or a company, or a registered firm, or any foreign
contractor or consultant or consortium shall deduct advance tax, at the time of making such
payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any
financial year shall, subject to the provisions of section 53, be given in computing the tax payable
by the recipient for the assessment year commencing on the first day of July next following the
said Financial year, or in the case of an assessor to whom section 72 ort section 81 applies; the
assessment year, if any, in which the “said date”, as referred to therein, falls whichever is the
later:
Provided that the provisions of this clause shall apply, mutates mutinies, to any payment made on
or after the first day of July, 1998, to a non-resident person on account of execution of a turnkey
contract, a contract of sub-contract for designing, supply of a plant and equipment and
construction, assembly or like project in Pakistan or any other contract for construction or for
service rendered other than that to which the provisions of sub-sections (3A) and (4A) apply.
Explanation.
For the purpose of clause (a) the expression “supply of goods” includes both cash and credit
purchases of goods by the payer, whether under a contract or not, on credit or in cash.
(b) The Commissioner may, on an application made by any such recipient and after making such
enquiry as he thinks fit, allow, by an order in writing, any person responsible for making such
payment not to deduct any tax from any payment or payments made to such recpient in any
financial year; and where such order is made, the person responsible for making any payment
shall thereafter, and until such order is cancelled, make such payment without deduction of tax
under clause (a): and
Provided that.
(i) Nothing contained in clause (a) or clause (b) shall apply any payment on account of
securitization of receivables or to any payment made on account of the refund of any
security deposit to the purchase of an asset under a lease and buy back agreement
by a modaraba or leasing company or a banking company or a financial institution.
(ii) Nothing contained in sub-section (10) shall apply to companies as payers and
(iii) Where tax is withheld by any person responsible for making any payment to the
Special Purpose Vehicle, on behalf of the originator, it shall be deposited to the credit
of the originator.
{Note : The following amendments were made vide Finance Ordinance, 2001.
In the proviso:
(i) in clause (i)
(a) after the word “apply” the words “any payment on account of securitization of
receivables by a special purpose vehicle to the originator or “ were inserted; and
(b) the word “and”, at the end, was omitted;
(ii) in clause (ii), for the full stop, at the end, the semi colon and word “; and” were
substituted and thereafter a new clause (iii) was added }
Deduction of tax at source (on payment of Brokerage and Commission)
Any person responsible for making any payment in full or in part (including a payment by way of
advance) to any person, on account of brokerage or commission on behalf of the Government, a
local authority, a company, a registered firm or foreign contractor or consortium shall deduct tax,
at the time of making such payment, at the rate specified in the First Schedule:
Provided that where any person receives payment on behalf of his principal and remits it after
deducting his commission such commission shall be deemed to have been paid to him and such
principal shall collect the tax.
{Note: This sub-section was substituted vide Finance Act, 1999}

News

Israel to Implement Income Tax Reforms, Vows Netanyahu,by Lorys Charalambous, Tax-News.com, Cyprus Last updated 8 hours ago Friday, March 06, 2009 Benjamin Netanyahu, Israeli Prime Minister-designate, has vowed to cut income taxes for low- and middle-income earners and reduce the corporate income tax on small businesses this year, contrary to recent reports suggesting reforms would be delayed.

Canada Grants Agricultural Tax Concessions, by Mike Godfrey, Tax-News.com, Washington Last updated 5 hours ago Friday, March 06, 2009 Canadian Finance Minister Jim Flaherty today tabled a proposal in the House of Commons for tax amendments to help farmers who have had to deplete their breeding herds of grazing livestock as a result of flood or excessive moisture.

Czech Government Approves Tax Amendments, by Lorys Charalambous, Tax-News.com, Cyprus Last updated 8 hours ago Friday, March 06, 2009 Reduced social insurance rates and shortened accelerated depreciation periods were approved by the Czech government on March 2; the two measures are expected to mitigate the effects of the financial crisis and boost employment.

News

Obama Urged To Clarify NAFTA Intentions,by Mike Godfrey, Tax-News.com, Washington Last updated 5 hours ago Friday, March 06, 2009 Echoing concerns held by many businesses trading across America's borders, a senior Republican Senator has urged President Obama to clarify his intentions regarding the North American Free Trade Agreement between Canada, Mexico and the United States.
France Announces Gambling Tax Rates,by Amanda Banks, Tax-News.com, London Last updated 4 hours ago Friday, March 06, 2009 French government budget minister Eric Woerth has this week announced the tax rates which will be levied on the gambling industry. The opening up of the industry to private sector competition is in response to infringement proceedings initiated by the European Commission.
Chinese Stimulus Package Will Not Be Increased,by Mary Swire, Tax-News.com, Hong Kong Last updated 6 hours ago Friday, March 06, 2009 Chinese premier Wen Jiabao has announced that no more funding will be added to the country's current stimulus package, but added that the government will boost spending over the coming months