Paying taxes on PhD stipends

[fuzzylogician]

If I posted about the long lines one would face under Obamacare in this thread, then it would be trolling, since it is off topic to this thread's content.

You express political opinions in a thread that is otherwise helpful and deals with facts;

what you say isn't relevant to the OP or anyone else for that matter for the next however many years;

and it won't affect most (future) students anyway because PhD stipends usually include health insurance.

I'd say that's trolling.

[Eigen]

Health insurance isn't that expensive.

I'm able to pay premiums for both myself and my wife (we opted to not go with the school plan) in addition to all my other expenses out of my stipend.

Oh, and your post was definitely off topic for the thread.

Edited August 30, 2010 by Eigen

[fuzzylogician]

Look, I'm not going to fight with you. If you read the sentence I cited above, it mentions the pejorative term "Obamacare" and talks about long lines, which are......an opinion, certainly not fact. We try to have polite discussions on this board and you seem to get upset and take it personally when someone disagrees with you. There is no need to send your conversation partners to read this or that every time you make a point. This is an internet discussion, not everyone has the time or energy to get too involved. Just give us the relevant facts and what you think about them.

Regardless, the point you make in your latest post is an interesting and relevant one, and if you'd made it to begin with no one would have objected. I'm not going to read the whole document you linked to, but maybe you know: students who need to pay for their health insurance over the summer now will continue to do so in 2013 and should meet the requirement in section 5000A; what will change under the new law?

[timuralp]

In essence, my post is on topic since this is a potential tax that can be levied on students who do not hold a graduate assistant position with a university, and who relies on external funding for support. If I posted about the long lines one would face under Obamacare in this thread, then it would be trolling, since it is off topic to this thread's content.

But... it's not. The question asked in the thread was "are stipends taxable and what are the taxes?" For the upcoming year and a few subsequent ones, your post is irrelevant. Further, a number of schools require students to either have the school health insurance or submit proof of insurance through other means. Finally, now you've reduced the argument to the 3 months of coverage in the summer after the next 3-4 years. Are you kidding me? This is on-topic, relevant, and meaningful? Give me a break.

[Postbib Yeshuist]

To answer the poster's question, yes. Your stipend is income and taxed as such, both at the state and federal level.

No. Here's the relevant statement by the IRS:

Other Grants or Assistance

If you are not sure whether your grant qualifies as a scholarship or fellowship, ask the person who made the grant.

Please do not assume one way or the other until you've talked to someone who knows the answer, not anonymous posters on an online forum. Though there's sopme good info here and reasonable statements, the final answer is that each of us has a unique situation, so the answer is actually "it depends." Remember, your stipend isn't just "generic" money. Some of it may come from very specific funding sources, and therefore have very specific classifications. (Some students refer to a "stipend" when they are actually receiving scholarship money). Some stipends are taxable while others aren't.

Bottom line: It all depends on how the university classifies the money. You should ask both the FinAid office and, ideally, a "tax professional".

PS There is also the point that some PhD students may actually be near or below the poverty line, in which case taxes become a whole new ballgame with lots of leeway (when filed correctly).

Edited September 5, 2010 by Postbib Yeshuist

[timuralp]

No. Here's the relevant statement by the IRS:

Please do not assume one way or the other until you've talked to someone who knows the answer, not anonymous posters on an online forum. Though there's sopme good info here and reasonable statements, the final answer is that each of us has a unique situation, so the answer is actually "it depends." Remember, your stipend isn't just "generic" money. Some of it may come from very specific funding sources, and therefore have very specific classifications. (Some students refer to a "stipend" when they are actually receiving scholarship money). Some stipends are taxable while others aren't.

Considering I looked through all the things IRS has to say about taxable and non-taxable scholarships and stipends, I'm going to say again, please give me an example of a tax-exempt stipend. IRS explicitly stated that whatever is used for living expenses is taxable income, whether it's payment for services or scholarship funds. I also posted links to the relevant pages on the IRS site. IRS actually posted specific examples of the funding and how it is classified. If you look through the tax code, living expenses are always classified as taxable income, and same goes for Payment for services (i.e. TA, GSRA). There are MORE relevant statements available from IRS.

Bottom line: It all depends on how the university classifies the money. You should ask both the FinAid office and, ideally, a "tax professional".

Please find me how any funding for living expenses is not taxable income. Everything I have looked at states that there are no exceptions.

PS There is also the point that some PhD students may actually be near or below the poverty line, in which case taxes become a whole new ballgame with lots of leeway (when filed correctly).

OR you could look at your income, apply the standard deduction and see if you have to pay any taxes by looking at the bracket you're in. It's not THAT complicated. There is also Earned Income Tax Credit, and the guidelines for it could be found here

For the record, I assume anyone asking for advice on forums would verify the information either with IRS or someone competent. The advice, as usual, does not come with any guarantees, etc, similar to asking your neighbor. I cited relevant information from IRS previously and pointed to where everything can be found. It is up to the person asking the question to follow up on references and make a decision. Some how you made it sound like people will take it as gospel.

Edited September 5, 2010 by timuralp

[timuralp]

Students have been known to submit false insurance information to avoid paying a college's health insurance fee. At the University of Minnesota - Twin Cities, approximately 15 percent of students enter in false health insurance information to avoid paying the fee since it is expensive (http://www.mndaily.c...1&quicktabs_6=0). This number is higher nationwide, with 16.5 percent of students uninsured. There is no way a department with a limited staff can audit 40,000+ students in one semester to ensure that no one is entering false information to avoid paying the insurance fee.

Was this article about graduate students? They typically are not referred to as "seniors", but what do I know?

I am not making up facts here. The "tax" is clearly stated in the Patient Protection and Affordable Care Act. The "tax" may not be implemented now, but I bet some of the current incoming PhD students will be around in 2014 when the "tax" is implemented. At that point, my posts will become relevant. In the immediate years before 2014, you are correct that the tax is irrelevant.

Ok, can we then have your posts appear in the year 2014 when they matter or at least 2013? Thank you for admitting you're not contributing to the conversation.

[Postbib Yeshuist]

I'm going to say again, please give me an example of a tax-exempt stipend.

http://www.regulations.utah.edu/administration/3-061.html

IV. Procedures

A. Stipends

1. Payments will be classified as stipends, and will be paid through the accounts payable system as tax exempt payments, if there is on file in the Controller's Office a properly executed Application for Stipends.

Also add ROTC and military academy stipends (though not pay for duty assignments in the summer, for example). And here's one that really gets into the nitty-gritty: http://tax.wustl.edu/policies/Pages/FellowshipStipends.aspx

Again, the IRS:

Students only: In general, those portions of a scholarship, fellowship, or grant used to pay tuition, fees, books, supplies, or equipment are classified as a "Qualified Scholarship" and are not includible in the gross income of the recipient under I.R.C. § section 117 if the recipient is a candidate for a degree. Any portion of the scholarship, fellowship, or grant that does not correlate to the five items mentioned above is includible in the gross income of the recipient, which means that it is subject to withholding.

So... it depends. It depends on how the university (and you) choose to treat/use them. Please don't try to oversimplify a complex topic. It is THAT complicated. If it weren't, the tax code wouldn't be 13,000+ pages (according to the US GPO). There is no "yes" or "no" when it comes to this. Thousands of students pay taxes on stipends each year when they don't have to, while (likely many more) thousands don't pay taxes when they should. Just an example: is a new laptop you bought with stipend money considered "equipment"? (If you answer anything but "it depends," you're wrong).

As for the standard deduction, again, it's not that simple. There are many other ways to reduce your taxable income.

I'm not going to go so far as to say I know every in and out, but I can say I've been paying taxes for longer than I care to remember, and much of it has been while in education in some form or another. Sometimes my stipend has been taxable, sometimes not; sometimes part, sometimes all.

Edited September 5, 2010 by Postbib Yeshuist

[Postbib Yeshuist]

Even those of us on fellowships get our stipends dispersed biweekly throughout the year. Ours just doesn't get taxes taken out of it.

For what it's worth, the IRS doesn't require schools to withhold.

All amounts paid to U.S. CITIZENS and RESIDENT ALIENS in the form of scholarships, fellowships, grants, and financial aid are not required to be reported to the IRS by the payors. (IRS Notice 87-31)

[timuralp]

http://www.regulations.utah.edu/administration/3-061.html

That means the university won't withhold taxes from it. How does that impact your tax liability under the federal income tax? Here is more on the subject of what is taxable with a nice table: http://www.irs.gov/publications/p970/ch01.html

Also add ROTC and military academy stipends (though not pay for duty assignments in the summer, for example).

Actually, only subsistence pay for ROTC is listed as tax exempt.

And here's one that really gets into the nitty-gritty: http://tax.wustl.edu/policies/Pages/FellowshipStipends.aspx

And it said that it may be taxable income. They really went over in detail as to how the pay is disbursed and whether taxes are withheld.

If it weren't, the tax code wouldn't be 13,000+ pages (according to the US GPO).

That is a terrible statistic to cite. Here is a simple math problem based on this number: the tax code is 13,000+ pages, what is the percentage spent on higher education? Oh, you can't answer? But you know the total size! That number is meaningless here. If you said "the tax code for higher education expenses, as applied to graduate students, is [some number] big" it would be more convincing.

As for the standard deduction, again, it's not that simple. There are many other ways to reduce your taxable income.

Well, sure, I itemized deductions on my last year's return and ended up saving more money, but that is not the common case for graduate students. The reason I could do it was because I have a mortgage. I just replied about the common case in this matter. The standard deduction, for most people, gives a rough estimate.

I'm not going to go so far as to say I know every in and out, but I can say I've been paying taxes for longer than I care to remember, and much of it has been while in education in some form or another. Sometimes my stipend has been taxable, sometimes not; sometimes part, sometimes all.

I am really curious when your stipend was not taxable income, because, as before, everything I've found from IRS on the topic states that it's an impossibility.

Edited September 5, 2010 by timuralp

[Postbib Yeshuist]

Sigh, this is getting boring. Nothing worse than arguing with someone who asks for an example and then when confronted with one tries to show how it doesn't apply. There's a reason I used the "13,000+ pages" comment because...

Quote

[section 117] is referred to in sections 25A, 74, 125, 127, 135,

414, 1441, 3121, 3231, 3306, 3401, 4941, 4945 of this title; title

42 section 409.

Now, continue arguing all you want. The fact is, I gave you some examples of how stipends may be tax-free, simply to illustrate the point that "it depends." The mere fact that you admit the WashU mentioned "may" be taxable income (not "must be") shows, that, wait for it... it depends. By all means, reply back with whatever "I refuse to budge from my position" refutation you want. The simple fact that spending a $2,000 stipend on $2,000 worth of books means the stipend is tax-free proves that... it depends on the circumstances and use. I'm willing to bet I've been paying taxes for quite a bit longer than you have (assuming here that CompSci PhD's are probably in the their mid- to late-20's), and I know I've verified some of the ins and outs of this section of the tax code with several professionals who, to the last person, have said "it depends. Bring me your records and let's look at it" But it's clear you know the answers, so by all means, continue assuming you have to pay taxes on every bit of it and I'll just get back to actually paying taxes when it's necessary and not when it's not. The mere fact you think that Section 117 is all that matters shows an incredibly naive approach to the tax code.

Personally, I'm considering this a pointless discussion. Hopefully someone will happen along, see "it depends," check into it and then save a few bucks. You, however, can feel free to continue paying more than you need to. In fact, here, let me introduce you to this wall...

[timuralp]

On 9/5/2010 at 5:35 PM, Postbib Yeshuist said:

Sigh, this is getting boring. Nothing worse than arguing with someone who asks for an example and then when confronted with one tries to show how it doesn't apply. There's a reason I used the "13,000+ pages" comment because...

Now, continue arguing all you want. The fact is, I gave you some examples of how stipends may be tax-free, simply to illustrate the point that "it depends." The mere fact that you admit the WashU mentioned "may" be taxable income (not "must be") shows, that, wait for it... it depends. By all means, reply back with whatever "I refuse to budge from my position" refutation you want. The simple fact that spending a $2,000 stipend on $2,000 worth of books means the stipend is tax-free proves that... it depends on the circumstances and use. I'm willing to bet I've been paying taxes for quite a bit longer than you have (assuming here that CompSci PhD's are probably in the their mid- to late-20's), and I know I've verified some of the ins and outs of this section of the tax code with several professionals who, to the last person, have said "it depends. Bring me your records and let's look at it" But it's clear you know the answers, so by all means, continue assuming you have to pay taxes on every bit of it and I'll just get back to actually paying taxes when it's necessary and not when it's not. The mere fact you think that Section 117 is all that matters shows an incredibly naive approach to the tax code.

Personally, I'm considering this a pointless discussion. Hopefully someone will happen along, see "it depends," check into it and then save a few bucks. You, however, can feel free to continue paying more than you need to. In fact, here, let me introduce you to this wall...

See, you started the argument. The whole thread was resting peacefully for a while, so it sounds more like you really need to throw your opinion into everything. The books example has been pointed out before, as well as multiple others. You haven't refuted any of the IRS links that I posted regarding this. They explicitly went over which parts are taxable and which are not. I'm glad you're done with this thread, because it was fine before you came along and offered no help and tried to add more confusion.

On 9/5/2010 at 5:35 PM, Postbib Yeshuist said:

By all means, reply back with whatever "I refuse to budge from my position" refutation you want. The simple fact that spending a $2,000 stipend on $2,000 worth of books means the stipend is tax-free proves that...

There is a caveat here that you forgot and came up almost two pages ago. The caveat is that the books have to be required by all students in the courses and used for educational purposes. Either way, this thread has a lot of answers early on, with excerpts and references to the IRS. It is not meant to replace reading the tax code for oneself but offers a good starting. I'm not sure what the problems with it are that you see.