Stipends and Taxes

[scyrus]

Are the stipends mentioned in offer letters generally before or after tax withholdings? For example, if I have been offered $X per month, is that $X what I will be getting monthly? or can I expect to see a lower number

[rising_star]

Before taxes, withholding, and any fees you may have to pay the university.

[Eigen]

For reference: Married filing jointly on a 30k stipend (single income), about $300 per month is the average withholding.

But yeah, award letters and such are before taxes.

[riceandbeans]

And just an FYI, if you are getting fellowship money, they might not withhold, in which case you will get to learn about the joys of estimated taxes.

[Eigen]

Oh yeah. Let me tell you how much fun that is.

[scyrus]

Thanks for the info. I'm not married, so I'll bank on seeing ~$400 less than the number on the offer letter =)

[Eigen]

Just run a quick withholding calculator- the IRS site has them, as does the turbotax site.

[KeepinOn]

Well, if the university has you pay any fees, or if you have any other qualifying educational expenses, you can list those as a credit, with the possibility of reducing your tax burden to (close to) 0 (on the Federal level at least. I'm not sure what happens on the state level).

[Eigen]

Just remember, if the school is paying for your Tuition (Tuition Waiver) the amount they're paying also has to be reported as "income"..... It just immediately is reduced by the cost of your tuition. This will show up on your 1098-T form (that you'll get from the school in the spring) showing your tuition, and the "scholarship" income applied to counter that tuition, with the fees left as payed by the student.

For grad students (mostly) the only cost you can deduct for educational expenses is the fees you have to pay to the school- the only expenses considered "qualified" are expenses that are required by the school to remain enrolled. Books can be a gray area, depending on how "required" they are... The most you can deduct is a primary text for each class.

[was1984]

One nice thing about graduate stipends is that they are not subject to payroll taxes (social security and medicare), so keep that in mind.

[Eigen]

One nice thing about graduate stipends is that they are not subject to payroll taxes (social security and medicare), so keep that in mind.

Depends on your school and the type of stipend.

At our school all TAs/RAs have payroll taxes deducted. And fellowships, you can either choose to do it all yourself (including quarterly taxes) or you have withholding taken out of it, in which case you pay into SS and medicare.

[newms]

For reference: Married filing jointly on a 30k stipend (single income), about $300 per month is the average withholding.

But yeah, award letters and such are before taxes.

Forgive my ignorance here, as a non-American, but is that $300 per month the total amount of taxes you pay, or do you have to pay additional taxes when you file your tax returns?

[was1984]

Depends on your school and the type of stipend.

At our school all TAs/RAs have payroll taxes deducted. And fellowships, you can either choose to do it all yourself (including quarterly taxes) or you have withholding taken out of it, in which case you pay into SS and medicare.

That's interesting. I have taxes withheld on my graduate stipend at my current university and they don't withhold anything for social security or medicare. Interesting that it differs...

[was1984]

Forgive my ignorance here, as a non-American, but is that $300 per month the total amount of taxes you pay, or do you have to pay additional taxes when you file your tax returns?

The $300 is a government estimate of your taxes. After the end of the year you will file a tax return and either get a refund or have to pay additional taxes. I generally get a few hundred dollars back at the end of the year, though this will depend on your situation.

[newms]

The $300 is a government estimate of your taxes. After the end of the year you will file a tax return and either get a refund or have to pay additional taxes. I generally get a few hundred dollars back at the end of the year, though this will depend on your situation.

Ok great. Where I'm from, I don't see around 25% of salary due to taxes so I was a little surprised at the figure - 300 per month from 30K = ~12%.

[was1984]

Ok great. Where I'm from, I don't see around 25% of salary due to taxes so I was a little surprised at the figure - 300 per month from 30K = ~12%.

If you had a real job, you'd see 25% or so here as well. Graduate stipends are not exactly lucrative jobs, so the tax rate is correspondingly lower.

[newms]

If you had a real job, you'd see 25% or so here as well. Graduate stipends are not exactly lucrative jobs, so the tax rate is correspondingly lower.

Ahh I see. Thanks.

[Eigen]

Note that's also married filing jointly- until my wife got into grad school, we were both living off my stipend. It would have been quite a bit higher had I either been single, or had we had two incomes.

It works out to about 25% for both of us together (~12% per person) and assumes we make about 15k each.

Was1984: It is really interesting they don't take out SS/Medicare, they're supposed to (if you read the tax code). I wonder if your funding falls under some special condition. Are you fellowship? Or TA/RA?

[riceandbeans]

Was1984: It is really interesting they don't take out SS/Medicare, they're supposed to (if you read the tax code). I wonder if your funding falls under some special condition. Are you fellowship? Or TA/RA?

My school doesn't take out medicare and social security. This is what they have to say about it:

"Under Internal Revenue Code §3121((10), a student who is registered for at least a half time (defined by the University as a minimum of three credit hours for the summer term and six credit hours for fall and spring terms) who is not a career employee qualifies for the Student FICA exemption on earnings from the institutions of higher education in which they are enrolled.

The exemption covers students enrolled during school breaks of five weeks or less providing the student was eligible for the exemption on the last day of classes prior to the break and is eligible for enrollment for the first academic period following the break. The exemption does not include student employees who are not enrolled in classes during school breaks of more than five weeks.

Under this criterion, foreign students who are resident aliens for tax purposes also qualify for the FICA tax exception."

Basically, if you're not working full time, aren't receiving benefits, and are a full time student, your appointment at the university is exempted from FICA (because your appointment at the university is primarily based on you being a student there). At least that's how my university is interpreting the tax code.

[Nurse Wretched]

This recently became an issue for medical residents, and the IRS decided that they were workers who were students, not students who were workers, so needed to pay FICA. They had not in the past done so.

[RPCV Cameroon]

Can you use Turbo Tax to figure your estimated taxes and quarterly payments?  Has anyone successfully done this using Turbo Tax?  Would you recommend it?

 

I'm planning to make quarterly payments just to be safe, but I'm confused about how it works when you're just starting school.  The following publications make it sound like you figure/estimate your total taxes for the current year AT THE BEGINNING OF THE CURRENT YEAR, then pay them at 4 times during the year (April, June, September, January)...  But what if you don't start school and receive your fellowship/stipend until September?  Will you get dinged for not having made estimated payments in April and June?  

http://www.irs.gov/pub/irs-pdf/f1040es.pdf
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes

Do you need to include deductions when you figure and make your quarterly payments, or can you simply wait and claim all the deductions when you file your annual return the next April?  (I assume you still need to file an annual return, right?...  Speaking of which, is making estimated payments anything like filing the annual tax return?)

Do you have to report the cost of the health insurance provided by the school?

Is there any penalty for overpaying estimated taxes, or for paying if you actually wouldn't have been required to?

And what about receiving extra funding in the middle of the year (i.e., a research or conference grant, summer support)?  Since it could be difficult to predict exactly what support you'll get, should you use the "annualized income installment method"?   From reading the description here   ->  http://www.irs.gov/publications/p505/ch02.html#en_US_2015_publink1000194572     ...  it *sounds* like this method allows you to figure your estimated taxes at regular intervals throughout the year (based on earnings during the specified period, and, now that I look at it, I think this method does want you to calculate the deductions four times a year as well).   Is that right?
^ This sounds like a HUGE pain in the ass, but - if you use the four-equal-payments method and end up getting an unexpected award - you could end up being penalized for underpaying.  


UGGGGGGGGHHHHHHHHHHHHHHHHH.

It pisses me off that the school doesn't just withhold.