APA APA Global Payroll & International Compliance 1

Question 1

When a US company pays a non-resident alien employee for services performed entirely outside the US, what is generally true about US federal income tax withholding?

Accepted Answer

No US federal income tax withholding is generally required

Answer

Wages paid to a non-resident alien for services performed entirely outside the US are generally not subject to US federal income tax withholding.

Question 2

What is a totalization agreement between the US and another country designed to prevent?

Accepted Answer

Dual social security/social insurance tax obligations for internationally mobile employees

Answer

Totalization agreements prevent employees from paying social security taxes to both the US and a foreign country simultaneously for the same work.

Question 3

Which IRS form is used by a US employer to report wages paid to non-resident alien employees subject to withholding?

Accepted Answer

1042-S

Answer

Form 1042-S is used to report US-source income paid to foreign persons, including wages subject to NRA withholding tax.

Question 4

When calculating a hypothetical tax (hypo-tax) for an expatriate employee, what is the primary goal?

Accepted Answer

To make the expat no better or worse off tax-wise than if they had stayed home

Answer

Hypothetical tax equalizes the expatriate's tax burden so they pay approximately what they would have paid at home, with the employer absorbing additional foreign taxes.

Question 5

What does the term 'shadow payroll' mean in global payroll management?

Accepted Answer

A payroll run in the host country for compliance purposes while the employee is still paid via home country payroll

Answer

Shadow payroll is maintained in the host country to meet local tax withholding and social security compliance obligations without actually paying the employee through that payroll.

(APA) American Payroll Association Certification Practice Test

(APA) American Payroll Association Certification Practice Test

APA APA Global Payroll & International Compliance 1