The United States does not exempt FAO earnings of its taxpayers from taxes. In the interest of equity, the UN General Assembly established a system (Tax Equalization Fund) to reimburse income taxes to those staff members who are required to pay taxes in respect of salaries or other emoluments they receive from the United Nations. The purpose of the reimbursement system is to place UN staff members subject to taxation in the position they would have been if their official emoluments were not taxed. Hence, it is intended neither to provide a benefit, nor to place the staff member at a disadvantage, in relation to other UN staff members who are not required to pay taxes to a Member State on their UN emoluments. FAO adopted the Tax Equalization Fund in Conference Resolution No. 1/1961. Thus, the Tax Unit processes tax reimbursement (and tax advance) requests from US taxpayers who are staff members (consultants are not eligible) of FAO, IFAD and WFP. The FAO Tax Unit is a separate entity from the UN Tax Unit and has different procedures.

Calculates and settles tax reimbursement and advance claims.

Reviews documentation of submitted claims and securely files/archives the completed claims. Revises FAO’s Administrative Circular (and WFP’s Administrative Directive) each year based on the updated IRS Tax Code, and facilitates its eventual approval for dissemination. Maintains the Tax Portal – particularly in regards to client login accounts and reimbursement/advance requests.

As of September 2019, the Tax Unit is working closely with FAO’s IT Division to re-program the Tax Portal and the Back Office of the Tax Portal to update the software and provide a more user-friendly experience for staff members who create and submit claims.

Provides guidance to clients in regards to Tax Portal functionality and the Tax Reimbursement Program. Acts as a liaison between clients and tax preparers (who provide specific tax advice) and other UN Tax Units to facilitate processing of claims.

Reconciles the cash disbursements with WFP and IFAD on a monthly basis.

Entitled staff members (including short-term staff) are United States citizens and resident aliens (permanent residents and green card holders) whose terms of employment specifically entitle them to income tax reimbursement.

Consultants and contractual personnel (PSA) are not entitled to such reimbursement. Staff members must notify HR regarding their citizenship status so that an official Statement of Earnings can be created and forwarded to the Tax Unit.

This is the confirmation that the staffer is eligible for the Tax Reimbursement Program. Short Term staff members are NOT eligible for tax advances; they may only claim tax reimbursements.

Eligibility must be determined. Each staff member must be listed in their respective HR departments as US citizens or permanent residents. Then, each Payroll department will send an official Statement of Earnings to the Tax Unit (annually – in mid-February) to confirm each staffers’ eligibility. For those staffers who begin their tenure during an estimate tax year, an official Statement of Estimated Earnings from Payroll is required. Alternately, an email confirmation of eligibility from the appropriate organization’s Payroll department is sufficient.

The staff member creates a login for the Tax Portal. The staffer is required to keep note of their own login credentials. Passwords are self-created and self-modified/updated. They should use the Instruction Manual for this and the next step.

The staff member creates and submits a tax reimbursement request in the Tax Portal and uploads all supporting documentation, per the Tax Unit’s checklist.

The staff member waits for the Tax Unit to review their request for reimbursement.

Eligibility must be determined. Each staff member must be listed in their respective HR departments as US citizens or permanent residents. Then, each Payroll department will send an official Statement of Earnings to the Tax Unit (annually – in mid-February) to confirm each staffers’ eligibility. For those staffers who begin their tenure during an estimate tax year, an official Statement of Estimated Earnings from Payroll is required. Alternately, an email confirmation of eligibility from the appropriate organization’s Payroll department is sufficient.

The staff member creates a login for the Tax Portal. The staffer is required to keep note of their own login credentials. Passwords are self-created and self-modified/updated. They should use the Instruction Manual for this and the next step.

The staff member creates and submits a tax advance request in the Tax Portal and uploads all supporting documentation, per the Tax Unit’s checklist.

The staff member waits for the Tax Unit to review their request for the tax advance.

Staffers who qualify should NOTE that there are two Options – A & B.

Option A – estimate tax per “prior year.” That is, the tax advance will equal the actual income tax from FAO/WFP/IFAD income from the prior year.

Option B – 90% of overall estimate tax from estimate income. That is, this option must be chosen for those staffers who either are separating from FAO/WFP/IFAD during the estimate tax year OR have started working with FAO/WFP/IFAD during the estimate tax year. In this scenario, the Tax Unit Requires the official Statement of Estimated Earnings (from Payroll only) in order to calculate how much the overall estimate tax is. Then, the Tax Unit will process 90% of that overall estimate tax liability.

The FAO Tax Unit’s policy is to pay tax advances directly to the tax authorities.

Staff Members should NOTE that tax advances are LOANS from the Organization, even though the payments are directly to the tax authorities. NOTE: Tax advances are LOANS from the Organization, not allowances or income. The tax advances must be reconciled with a tax reimbursement for the same tax year. Thus, if a staffer receives a 2020 tax advance, they are Required to submit a 2020 tax reimbursement per the internal deadlines of the FAO Tax Unit. Otherwise, their tax advance will be recovered from salary at 100%.

Therefore, if a staffer receives a 2020 tax advance, then that staffer Must fully submit and provide all supporting documentation for a 2020 tax reimbursement before or by 15 September 2021.

Eligibility must be determined. Each staff member must be listed in their respective HR departments as US citizens or permanent residents. Then, each Payroll department will send an official Statement of Earnings to the Tax Unit (annually – in mid-February) to confirm each staffers’ eligibility. For those staffers who begin their tenure during an estimate tax year, an official Statement of Estimated Earnings from Payroll is required. Alternately, an email confirmation of eligibility from the appropriate organization’s Payroll department is sufficient.

The staff member creates a login for the Tax Portal. The staffer is required to keep note of their own login credentials. Passwords are self-created and self-modified/updated. They should use the Instruction Manual for this and the next step.

The staff member creates and submits a tax advance request in the Tax Portal and uploads all supporting documentation, per the Tax Unit’s checklist.

The staff member waits for the Tax Unit to review their request for the tax advance.

Staffers who qualify should NOTE that there are two Options – A & B.

Option A – estimate tax per “prior year.” That is, the tax advance will equal the actual income tax from FAO/WFP/IFAD income from the prior year.

Option B – 90% of overall estimate tax from estimate income. That is, this option must be chosen for those staffers who either are separating from FAO/WFP/IFAD during the estimate tax year OR have started working with FAO/WFP/IFAD during the estimate tax year. In this scenario, the Tax Unit Requires the official Statement of Estimated Earnings (from Payroll only) in order to calculate how much the overall estimate tax is. Then, the Tax Unit will process 90% of that overall estimate tax liability.

The FAO Tax Unit’s policy is to pay tax advances directly to the tax authorities.

Staff Members should NOTE that tax advances are LOANS from the Organization, even though the payments are directly to the tax authorities. NOTE: Tax advances are LOANS from the Organization, not allowances or income. The tax advances must be reconciled with a tax reimbursement for the same tax year. Thus, if a staffer receives a 2020 tax advance, they are Required to submit a 2020 tax reimbursement per the internal deadlines of the FAO Tax Unit. Otherwise, their tax advance will be recovered from salary at 100%.

Therefore, if a staffer receives a 2020 tax advance, then that staffer Must fully submit and provide all supporting documentation for a 2020 tax reimbursement before or by 15 September 2021.

Executive Summary is here.

The Full Guidance Note/Administrative Circular is here.

FREQUENTLY ASKED QUESTIONS ON INCOME TAXES IN THE UNITED NATIONS

The following most frequently asked questions are explained in detail.  Please read it and forward it to your Tax Preparer for review. Please note that these questions do not comprise an exhaustive list, and therefore should not be used in lieu of the Guidance Note on United States Income Tax.

1.            What is the main purpose of the United Nations tax reimbursement system?

The United States does not exempt FAO earnings of its taxpayers from taxes.  In the interest of equity, the UN General Assembly established a system (Tax Equalization Fund) to reimburse income taxes to those staff members who are required to pay taxes in respect of salaries or other emoluments they receive from the United Nations.  The purpose of the reimbursement system is to place UN staff members subject to taxation in the position they would have been if their official emoluments were not taxed.  Hence, it is intended neither to provide a benefit, nor to place the staff member at a disadvantage, in relation to other UN staff members who are not required to pay taxes to a Member State on their UN emoluments.  FAO adopted the Tax Equalization Fund in Conference Resolution No. 1/1961.

2.            What is staff assessment and how is it related to income taxes?

Staff assessment is an amount deducted from all FAO staff members’ gross pay according to the FAO Staff Regulations and Rules, regardless of their nationality.  The Staff Assessment is not a withholding tax. This amount is credited to the Tax Equalization Fund. In establishing the actual amounts of contributions to be paid by individual Member Nations to the FAO regular budget, the assessment of each Member Nation is reduced by any amount standing to its credit in the Tax Equalization Fund provided that the credit of a Member Nation that levies taxes on the salaries, emoluments and indemnities received from FAO by a staff member is reduced by the amounts of such taxes reimbursed to the staff member by FAO. When staff members have to pay national income taxes on their FAO earnings, they are reimbursed from the Tax Equalization Fund irrespective of the total amount of staff assessment deduced from their salaries.  Staff assessment cannot be claimed as a deduction on United States income tax returns nor be reimbursed to staff members under any circumstances.

3.            Who is subject to United States income taxation on FAO earnings?

United States citizens and permanent residents are subject to United States income tax on their FAO earnings. In addition, United States citizens serving in the United States are also subject to self-employment tax on their FAO earnings. FAO reimburses those staff members who have to pay the United States income taxes due on their FAO earnings as well as one half of the related self-employment taxes payable by the United States citizen.

4.            Who has to pay self-employment tax and what is a staff member’s share?

Based on United States law, it is mandatory that all United States citizens who perform work-related activities (not vacation or sick leave) in the United States pay self-employment tax on their earnings.  United States citizens serving abroad who spend time on official duty in the U.S. are subject to self-employment tax for official work days.  For 2018, FAO will reimburse 50% of self-employment tax on self-employment earnings on FAO taxable earnings as calculated on IRS schedule SE.  The Staff member is responsible for the balance.  The staff member is also responsible for the additional 0.9% Medicare Tax on wages and self-employment (SE) income that exceeds certain thresholds.  The additional 0.9% Medicare tax is calculated on IRS Form 8959.

5.            How does a staff member request an income tax reimbursement and/or advance from the FAO Tax Unit?

Staff members who are eligible for tax reimbursement are granted access to the FAO Tax Portal in order to create and submit their reimbursement and/or advance requests.

To access the Tax Portal, active FAO staff may access the site here: adminweb.fao.org/lowustaxportal or lowustaxportal.fao.org. If the active or separated staff wants to access the Tax Portal from the internet (outside of the FAO system), they may go to this site: lowustaxportal.fao.org.

The first step is to ensure that their account has been enabled by the FAO Tax Unit. Once in the Tax Portal, the staff member(s) may create and submit reimbursement and/or advance requests and upload the pertinent documentation. Staff members may request the Tax Portal Instruction Manual for graphic step-by-step guidance in maneuvering within the Tax Portal. Also, please review the checklist of required documentation on page 20 of this Guidance Note.

6.            How do I submit additional documentation through the Tax Portal System (to a request that’s already been submitted)?      

Go to the tax portal, choose the Requests menu and then click Submit documentation submenu. Enter the requested information, choose the document to upload (PLEASE make sure the file name has no special characters – only letters and number), and click Upload file.  Finally, click Next, then click Finish to complete the process.

7.            What are the deadlines for submitting requests for income tax reimbursements to FAO and filing with United States tax authorities?

All staff members who received tax advances to pay estimated taxes for 2018 must apply for Reimbursement in the tax portal no later than 16 September 2019.  If the staff member does not submit their portal request by this date, any tax advance payments paid by FAO will be recovered through salary deduction via payroll, starting in October 2019.

The deadline for filing federal tax with the IRS is 15 April 2019; however, U.S. Citizens and Resident Aliens residing abroad are automatically granted a two month extension (17 June 2019) to file their U.S. Income Tax Return, provided they submit a statement with their return justifying this extension.  Please note that this deadline is not applicable to payment of tax liability; if the staff member has tax liability due, the IRS expects the payments to be made per their deadlines.

8.            How does the FAO calculate income tax reimbursements due to staff members?

Income tax reimbursements are made for the tax attributable to FAO salary and emoluments. This tax is based on the income tax returns submitted by a staff member. The LOW Tax Unit will calculate the following:

(a) the actual total tax payable for the year as shown in the copies of the tax return with the FAO-derived income included; and

(b) the tax that would be payable if FAO income were excluded from total income. 

Both calculations use the actual income, loss, adjustment to income, total deductions and exemptions claimed by the staff member on his/her tax returns to arrive at the taxable income. The difference between the two calculations is the tax attributable to FAO-derived income.

“The limitation of exemption that results from including United Nations earnings in alternative minimum taxable income is taken into consideration for the calculation of reimbursement of alternative minimum tax.  Additional Medicare tax and net investment income tax are employees’ responsibility and are not reimbursed by the United Nations.” (UN Secretariat ST/IC/2017/4 page 18)

“Note: Phased-out exemptions and limitations of itemized deductions that may result from inclusion of United Nations earnings are not claimable. Premium, additional child and other tax credits (under “payments” on the second page of IRS form 1040) for which a staff member may be eligible on the basis of non-United Nations earnings alone, but for which a staff member is not eligible on the basis of actual total income, including United Nations earnings, are also not claimable”. (UN Secretariat ST/IC/2017/4 page 7)

To illustrate, assume that a staff member and his/her spouse working in Rome, filed as married filing jointly, had no dependents, and were not subject to Social Security tax:

FAO-derived income                                                                      $150,000

Non-FAO-derived income                                                                 50,000

Less:  Deductions                                                                                (24,000)

Foreign Earned Income Tax credit (exclusion)                      (103,900)

Taxable income                                                                                   $72,100

Tax Liability                                                                                        $16,082

*************************************************

Non-FAO income                                                                              $50,000                                                               

Less:  Deductions                                                                               (24,000)

Taxable income                                                                                  $26,000

Tax Liability                                                                                         $2,742

*************************************************

Overall Tax Liability                                                                           $16,082

Tax Liability from non-FAO-derived income                               (2,742)

Total Amount Reimbursable to Staff Member                      $13,340

9.            I do not have a U.S. bank account; can I be paid by check?

The Tax Unit does not process checks directly to staff members. Tax payments can only be made to the staff member’s U.S. bank account (electronic banking) or directly to the tax authorities (by check).  

Please contact [email protected] for guidance on special cases/requests.

10.          Who gets the tax refund that a staff member receives from the tax authorities?

Entitlement to tax refunds is dependent upon who overpaid the tax authorities. If the Staff Member receives a tax refund from either the IRS or state tax authorities, it is mandatory that the Staff Member notifies FAO-LOW which will review and discuss the details.  Staff members who continue to be subject to US income taxes on FAO Earnings should indicate on their tax return that the over-payment should be applied to the following year’s estimated taxes.  Separated staff members should return FAO’s portion of the tax refunds to the Organization.

11.          Who pays the penalties and interest imposed by tax authorities?

Staff members are responsible for filing complete, correct and timely tax returns, as well as paying the tax authorities per their deadlines. FAO will not reimburse staff members for penalties and/or interest imposed by tax authorities on their FAO earnings unless:

(a) the delays are attributable to the Organization; or

(b) penalties or interest are the result of written instructions given by FAO.  Under certain conditions, staff members serving outside the United States may also be reimbursed for penalties and interest (M.S.309).  FAO will not pay any late filing penalties under any circumstances.  Staff members are, therefore, advised to file the appropriate extension forms with tax authorities before the deadline for filing is due.

12.          What is a Statement of Estimated Earnings? Why do I need it and where does it come from?

The Statement of Estimated Earnings is a statement that shows the staff member’s estimated income for the following calendar year. It is needed when requesting an advance based on estimated tax (Option B). This statement is issued by FAO’s Payroll Services ([email protected]).

13.          I am getting ready to send my tax return to the IRS; however, I would like to have it reviewed. Is there someone at FAO who could to this for me?

FAO-LOW cannot do “previews” of tax returns that have not been filed with the tax authorities.

FAO-LOW issues tax reimbursement for individuals who have already filed their taxes with the tax authorities. You may choose to employ a tax preparer or service center to prepare your tax return. FAO is not in a position to either review tax forms for accuracy or provide advice.

14.          Are taxes paid on all separation payments received from FAO reimbursable?

Separation payments such as repatriation grant, commutation of accumulated annual leave, etc. are FAO-Derived income and taxes paid are therefore reimbursable.

15.          How do I find out about taxation on my pension benefits?

Contact the United Nations Joint Staff Pension Fund at

[email protected]
Phone: (212) 963-3146
Website: http://www.unjspf.org.

Staff members may request the UN Booklet entitled ‘Guide to National Taxation of United Nations Joint Staff Fund Benefits with Special Reference to U.S. Taxes. For specific tax advice, please contact a tax accountant or advisor as to how pension income is taxed.

16.          Are consultants and short-term personnel eligible for U.S. tax reimbursement from FAO?

No, they are not reimbursed by FAO for U.S. income taxes levied on their honoraria.

17.          Should a staff member submit a copy of his/her income tax return to LOW Tax Unit if s/he is stationed abroad and does not have any federal tax due in respect of FAO earnings?

The FAO Tax Unit does not require that original hard copies of tax returns be sent to our office. Staff members should create the tax reimbursement in the Tax Portal and upload their filed tax return. 

Note that U.S. citizens and resident aliens are required to file an income tax return even though they may have no tax liability.  It is advisable for the staff member to file a return with the tax authorities and request a tax reimbursement (uploading the filed income tax return and other necessary documentation) via the Tax Portal, even if the staff member fully qualifies under the foreign earned income exclusion and may not have any tax liability.  The filed return provides a continuous record for the staff member’s tax file and, in instances of subsequent amendments, the staff member may submit an amended return to FAO-LOW for reimbursement, even beyond FAO’s two-year time limit.

18.          Do I have to pay state taxes as an employee of FAO?

Filing requirements for individuals living abroad vary from state to state. You need to obtain the state income tax publication for the state concerned to determine your liability as a non-resident.

19.          Once all of my documentation has been submitted, how long will it take for me to receive my payment?

The Tax Unit usually takes 5-7 business days to begin reviewing submitted requests. Once the Tax Unit has all the necessary supporting documentation, the (payment, as applicable) processing time takes 10-15 business days.

20.          Should Staff members with signature authority, or other authority over one or more of the Organization’s financial accounts in foreign countries, complete FinCEN Form 114 - Foreign Bank Accounts and Financial Accounts?

Staff members are still required to disclose and report their personal foreign bank and financial accounts to the IRS. Please consult with your tax advisor for details and specifics.

Note that the Tax Unit does not require the filed FinCEN forms to process tax reimbursements.

21.          What should be the filing status of same-sex married couples under federal and state tax laws?

Same-sex marriage laws have been signed in several states. Same-sex married couples in those states must file their state income tax as married.  On 29 August 2013, the US Department of Treasury and the IRS ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.  Therefore, same-sex married couples are allowed to file their federal tax returns for 2017 as “married filing jointly” or “married filing separately.”

22.          What if the Staff member disagrees with the Tax Unit’s assessment and interpretation of the tax laws or manual sections?

Each Staff Member who applied for a tax reimbursement or advance who received the results of the Tax Unit’s calculations and disagrees with some aspect of either the calculation or policy may request that the Tax Unit Supervisor review their case.

If the Tax Unit Supervisor is not able to resolve the concern(s) satisfactorily, the Staff Member may then request that the FAO Liaison Office - Washington (LOW) Director review the case.

If further escalation is required, the Staff Member can write the LEG-Director along with the supporting documentation.

This Appeals process is subject to the two-year limitation policy stated in the Guidance Note (from Manual paragraph 309.6.1.)

23.          Under what circumstances can a married staff member file separately?

Generally, if a married staff member is not receiving dependency benefits for his/her spouse, he or she can elect to file separately. If the staff member uses itemized deductions that are less than the standard deduction, the United Nations will calculate the reimbursement using the standard deduction. If a staff member files separately while receiving dependency benefits for his/her spouse, the United Nations’ reimbursement of income taxes will be calculated as if he/she is filing a joint return with the spouse (see para. 11).  If the staff member’s spouse in a non-US citizen or permanent resident (and has no SS# or ITIN) but receives child allowance from the Organization, they may file under Head of Household, in order to claim the deduction of dependent children.

However, as always, staff members should discuss their specific situation with a tax preparer.

24.          Does a staff member have to claim dependents for whom he or she receives dependency benefits from the United Nations?

A staff member who has received United Nations dependency benefits for his/her spouse, children or relatives residing in the United States is required to claim the appropriate exemptions for the dependents, or provide acceptable written explanation as to the reason for not doing so (see para. 23).

25.          I have refugee/political asylum status and a valid work permit but am not a permanent resident of the United States or a United States citizen. Should I pay tax on United Nations emoluments?

No. United Nations staff members who have employment authorization in the United States (a work permit) and who have refugee/political asylum status are exempt from income taxation by the United States on their United Nations earnings, as long as they have not been granted permanent residency status in the United States (alien registration card) and sign the waiver of rights, privileges, exemptions and immunities under the Convention on the Privileges and Immunities of the United Nations.

Genevie Dayrit is the focal point for the Administrative and Finance Team for FAO’s Liaison Office for North America. She joined FAO in October 2009 from the World Food Program.   

Genevie is from the Philippines and holds a Bachelor’s degree in Interdisciplinary Studies as well as a Master’s in Business Administration with a concentration in Management.  

Bonnie Harris joined the FAO Tax Unit in April 2012.  She reviews, calculates, and processes tax reimbursement and advance requests received from FAO, WFP and IFAD staff members who are eligible for the tax reimbursement program. She also provides guidance and education to staff members regarding the program’s policies and procedures; and updates the Administrative Circular/Directive on Taxes.

Bonnie has a Bachelor’s degree from Texas A&M University and is a certified U.S. Income Tax Preparer. She has 25 years of mid-to-high level office and financial management experience working with IFAD’s North American Liaison Office, various NGOs and Nonprofit Organizations, as well as corporate law and economic consulting firms.

Ataur Patwary joined the FAO Liaison Office for North America in April 2016. In his role, he reviews, calculates and process tax reimbursement and advance requests received from staff members who are eligible for the tax reimbursement scheme for FAO, World Food Program (WFP), and International Fund for Agricultural Development (IFAD). 

Before joining the FAO, Ataur worked for diverse public and private organization as a finance and accounting professional. Ataur holds a Master’s degree in Accounting from the University of Dhaka, Bangladesh.