September, 2014 - FMS Newsletter
Financial Management Services

In This Issue

September, 2014

Account Guidelines

When creating a new account, the following three required fields always stand in the way of completing the document:

Account Fields

What are these fields used for?

These fields are used to define the activity in the account for those not familiar with the day to day operations, someone at the campus or central administration level or an external auditor.

How about some examples?

Some accounts can be very specific. An example would be an account to equip a lab for a new faculty member funded from the school’s general fund. Guidelines for that account might be:

  • Account Expense: Capital equipment, lab supplies
  • Account Income: Transfer from School of XYZ general fund account xx-xxx-xx
  • Account Purpose: To equip Dr. Smith’s research lab

Other accounts can be less specific. An example would be a general fund account for a dean in an academic RC. Guidelines for that account might be:

  • Account Expense: Compensation, financial aid, general expense, travel, capital
  • Account Income: General fund
  • Account Purpose: Dean’s account in School of XYZ

Examples of what we do not want to see:

  • Various
  • Multiple sources of income
  • Within university guidelines
  • Any allowable expense
  • One word acronyms. You may understand that an income guideline with the four letters ‘COAS’ means ‘transfer from an Arts and Sciences general fund account’, but will someone not familiar with the RC understand that as well?

Tax Tidbits

About University Tax Services

Visit University Tax Services newly improved and updated web site! There are a number of new features available you won’t want to miss. There is also a helpful overview of each staff member’s responsibilities regarding tax compliance and reporting for the university on the About Us page. You will find this to be a good resource when you need to know who to contact for a perplexing tax question. You may also use the department email taxpayer@indiana.edu and let us determine how to handle your question.

Updated Independent Contractor Questionnaire

Indiana University is required by the IRS to determine whether a worker should be classified as an employee or an independent contractor before engaging the worker for services. The reason arises from the withholding tax requirement that every employer must withhold income tax from wages paid. Significant ramifications result from classifying a worker incorrectly were the IRS to conduct an audit.

University Tax Services has recently updated our Independent Contractor Questionnaire to aid departments in making the employee/independent contractor classification prior to engaging a worker. This resource is used to clarify IU policy FIN-PAY-IV-220 and IRS instruction on this topic. Use the resource page below to help your department with this tricky area before forming a service agreement with a worker.

New Form W-8BEN and Form W-8BEN-E for All Foreign Vendors

The IRS has issued new versions of Form W-8BEN. Please start collecting these forms for all new foreign vendors; W-8BEN for individual and W-8BEN-E for entities. If possible departments should begin to obtain a new updated form for existing foreign vendors. The forms can be found on our Forms page or New Form W-8BEN and W-8BEN-E page. The U.S. Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010 in an effort to ensure full reporting of worldwide U.S. income and proper tax withholding. This has resulted in revised tax form W-8BEN and a new form W-8BEN-E required to be completed by foreign entities.

Form W-8BEN:

  • For use by foreign persons only (not corporations, partnerships, government entities or non-profits).
  • Example of a properly completed W-8BEN form may be found on our website:
  • Form W-8BEN generally expires 12/31 of the third year after the year of signing; for example a form signed 9/1/14 will not expire until 12/31/17.

Form W-8BEN-E:

  • For use by foreign entities; there are several exceptions. Common entities that meet this exception are foreign partnerships (complete Form W-8IMY) or foreign government or non-profit (complete Form W-8EXP).
  • For most entities doing business with IU, the entity will complete the following:
    • Part I, Identification of Beneficial Owner, items 1, 2, 4, 6, 7 and 8.
    • Part III, Claim of Tax Treaty Benefits, if the entity requests tax treaty benefits.

Chapter 3 of the U.S. tax Code has long governed the income tax obligations of non-U.S. persons/entities who are earning or receiving U.S. source income. Form W-8BEN has been used to establish that the person was not a U.S. person, was the beneficial owner of U.S. sourced income, and if possible to claim reduced withholding due to a tax treaty with the U.S.

The enactment of FATCA created the new Chapter 4 section of the U.S. tax Code. Chapter 4 requires foreign financial institutions (FFIs) to identify their U.S. account holders. A foreign financial institution is a foreign entity that is a depository institution, custodial institution, investment entity or an insurance company. Chapter 4 also requires withholding agents (such as IU) to withhold on certain payments made to a foreign entity. A foreign entity receiving a payment subject to withholding under Chapter 3 or 4 should provide Form W-8BEN/W-8BEN-E when requested to avoid withholding consequences.

 

Kuali Time Leave Accrual Tab

FMS Payroll receives a lot of questions about how the hours are calculated in the “Hours Adjust” column on the Leave Accrual tab in Kuali Time. For biweekly employees, the "Hours Adjust" column will populate if you accrue more hours than you are allowed to take in a year. It also populates (and may show negative hours) when you transfer hours from one leave bank to another (PTO to SCK, SCK to VAC), or take sick, vacation or PTO hours coded as family medical FMLA leave (SFL, PFL, VFL, etc.).

Payroll Processing Standard Operating Procedures

In an effort to help standardize and streamline departmental and campus payroll processing we have created two new “Standard Operating Procedures” (SOPs):

Even if you are an experienced payroll processor, please take a look at these documents. We think you will find them to be useful resources.

Explanation of Fiscal Period CB

CB is for contracts and grants beginning balance. It is to facilitate reporting income and expense over the life of a grant rather than on a fiscal year basis.

Period CB is for income and expense object codes only. What you will find is the sum of the activity in that object codes for all prior fiscal years. So, imagine a two year grant that started on 12/1/2011. That is fiscal year 2012. Between 12/1/2011 and 6/30/2012 the grant spends $300 on object code 5000 and receives $275 income on 1181. In the example below, the account line annual balance amount is used. That field is the sum of the activity in the fiscal year. For fiscal year 2012 the balances will look like this:

Fiscal year Object code Account line annual balance amount C&G beginning balance amount
2012 1181 $275 $0
2012 5000 $300 $0

Beginning balances are then loaded for FY13:

Fiscal year Object code Account line annual balance amount C&G beginning balance amount
2013 1181 $0 $275
2013 5000 $0 $300

During fiscal year 2013, the account has another $500 of expenses and $475 of income. At the end of fiscal year 2013, balances will look like this:

Fiscal year Object code Account line annual balance amount C&G beginning balance amount
2013 1181 $475 $275
2013 5000 $500 $300

Balances are then loaded for FY14:

Fiscal year Object code Account line annual balance amount C&G beginning balance amount
2014 1181 $0 $750
2014 5000 $0 $800

Through the end of the grant there is another $200 in expenses and $250 in income. At the end of FY14 balances will be:

Fiscal year Object code Account line annual balance amount C&G beginning balance amount
2014 1181 $250 $750
2014 5000 $200 $800

When it is time to load 2015 balances:

Fiscal year Object code Account line annual balance amount C&G beginning balance amount
2015 1181 $0 $1000
2015 5000 $0 $1000

To get life of the grant income or expenses for a given account choose the current fiscal year and sum account line annual balance amount and C&G beginning balance amount. To get only the activity during the fiscal year, select only account line annual balance amount.

Whether or not to use C&G beginning balance amount depends on the question you are trying to answer. For example, what is the total amount of grant income for grants where Prof. X is PI over his career with the school? In that case you could select the current fiscal year and sum the account line annual and C&G beginning amounts for Prof. X’s accounts. If you are looking at an individual grant the C&G beginning balance is very helpful. If you are combining grants, a time period is most likely specified and C&G beginning balance will not be necessary.

Accounts Payable Steps for Timely Payment

FMS Accounts Payable (AP) focuses on one mission: To process timely and accurate payments for products and services for Indiana University. AP recently conducted an analysis of internal operations, and identified the following top four (4) action steps between AP, IU’s departments, and vendors to facilitate that mission.

Four action steps to ensure timely payment:

  1. PO: Always place the PO number in a conspicuous place on the invoice.
    Remember: a department official’s name cannot substitute for a PO number. A name will not facilitate payment.
  2. PO: Always create a unique invoice number that is easy to discern. Do not repeat the same invoice number on future invoices.
  3. PO: Submit one (1) invoice.  Duplicate invoices do not expedite payment.
  4. DV: For DV Vendor approvals with W-8BENs, the initiator should write the document number on the W-8BEN in a conspicuous place.

PO=Purchase Order
DV=Disbursement Voucher

Thank you taking these steps to help Accounts Payable issue timely and accurate payments – essential to maintaining operations at Indiana University.

AP invites your feedback via email:

Disbursement Voucher Certification

We have completed our initial round of DV Certification and want to thank everyone who helped us make it a success.

Of the 1343 people who completed the certification program prior to the September 1 cutoff:

  • 439 completed training through the online course modules
  • 543 completed training through the in-person meetings
  • 266 completed training through the Adobe Connect sessions
  • 95 completed more than one type of training

Going forward, all employees requiring access to initiate DVs will need to obtain certification by completing campus training and passing the post-training assessment. For more information, please review our DV Certification (https://fms.iu.edu/training/dv-certification/) web page.

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