taxation and other questions

[tomahok]

so in my admission letter my university wrote "Full support of tuition and stipend as a graduate research assistant for the duration of the Ph.D. and then they said the stipend would be $29k

I know it might sound silly to ask this but i just wanted to make sure. does it mean they would pay my tuition and the stipend wonldn't be charged for tuition?

do you happen to know what is the tax that i have to pay for the stipend?

[robot_hamster]

At my school, tuition is waived by giving you a "scholsrship" for the exact amount. Stipends are separate and they are paid out as paychecks each month. Offer letters usually say tuition is this, stipend is this, and the total is this.

From reading around on this forum, it appears taxes depend on how the school classifies it. I've heard people say they have to pay taxes. I don't. Well, not fed taxes anyway. They took out state, but I got it back in a refund when I filed.

[TakeruK]

If you are worried, it would not hurt to check. Probably asking the Graduate Program coordinator at your department?

I would have interpreted the term "full tuition support and stipend" as:

(full tuition support) and (stipend), i.e. 2 different sources, one of which is equal to your tuition and the other equal to $29k.

In all my letters of offer, this has been what the school meant. Usually it goes on to say that the tuition portion is not taxable but the stipend is, which I think even further separates the two as two distinct sources of funding. But it doesn't hurt to check!

[ImGrumpy]

If you are worried, it would not hurt to check. Probably asking the Graduate Program coordinator at your department?

I would have interpreted the term "full tuition support and stipend" as:

(full tuition support) and (stipend), i.e. 2 different sources, one of which is equal to your tuition and the other equal to $29k.

Although I agree with this, It would be wise to check exactly what "full tuition support" means at this University. While tuition and academic fees are usually included, at some places "non academic" required fees are not included (think newspaper, athletic, graduate student association etc). So you may still owe some portion of the fees. Better to know this ahead of time.

From reading around on this forum, it appears taxes depend on how the school classifies it. I've heard people say they have to pay taxes. I don't. Well, not fed taxes anyway. They took out state, but I got it back in a refund when I filed.

Be careful with this. How the school classifies a stipend/fellowship only affects whether they are required to handle Federal Witholding for Taxes or provide a W-2 or 1099 for this income or not, NOT if you owe taxes. If the school requires some work in return for the stipend (RA/TA) then it is considered wages and they are required to withold taxes. If no work is required for the stipend, then the school is not required to withold Federal taxes but any money that the graduate student receives that isn't used to pay tuition and fees is taxable to the student.

If the student's total taxable income is less than $9500, ($3700 exemption and $5800 standard deduction), then the student doesn't need to file a federal income tax and will owe no taxes. However, with a $29,000 stipend, you will need to pay taxes even if the University doesn't withold any. Using the IRS witholding calculator, if you are single and have no other deductions, you will owe between $2400 and $2800 in Federal taxes. You will also owe state taxes in most states. That will vary but most likely between $950 and $1100 in state taxes.

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Edited April 18, 2012 by ImGrumpy

[ImGrumpy]

Here is more information on taxes for students and scholarships/fellowships directly from the IRS.

Topic 421 - Scholarship and Fellowship Grants

A scholarship is generally an amount paid or allowed to a student at an educational institution for the purpose of study. A fellowship is generally an amount paid to an individual for the purpose of research.

If you receive a scholarship or fellowship grant, all or part of the amounts you receive may be tax-free.

Qualified scholarship and fellowship grants are treated as tax-free amounts if the following conditions are met:

• You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
  
• Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.
  

You must include in gross income amounts used for incidental expenses, such as room and board, travel, and optional equipment, and generally amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. Also you must include in income any part of the scholarship or fellowship that represents payments for services.

However, you do not need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.

If any part of your scholarship or fellowship grant is taxable, you may have to make estimated tax payments. For more information refer to Publication 970 , Tax Benefits for Education.

Additionally, some tribal fellowships, even for room and board/etc are tax free. Depending on their home country, International students may not owe Federal taxes based on tax treaties the US has with their countries. They would then follow the tax rules of their own country.

[robot_hamster]

Although I agree with this, It would be wise to check exactly what "full tuition support" means at this University. While tuition and academic fees are usually included, at some places "non academic" required fees are not included (think newspaper, athletic, graduate student association etc). So you may still owe some portion of the fees. Better to know this ahead of time.

Be careful with this. How the school classifies a stipend/fellowship only affects whether they are required to handle Federal Witholding for Taxes or provide a W-2 or 1099 for this income or not, NOT if you owe taxes. If the school requires some work in return for the stipend (RA/TA) then it is considered wages and they are required to withold taxes. If no work is required for the stipend, then the school is not required to withold Federal taxes but any money that the graduate student receives that isn't used to pay tuition and fees is taxable to the student.

If the student's total taxable income is less than $9500, ($3700 exemption and $5800 standard deduction), then the student doesn't need to file a federal income tax and will owe no taxes. However, with a $29,000 stipend, you will need to pay taxes even if the University doesn't withold any. Using the IRS witholding calculator, if you are single and have no other deductions, you will owe between $2400 and $2800 in Federal taxes. You will also owe state taxes in most states. That will vary but most likely between $950 and $1100 in state taxes.

.

I don't know if amount had anything to do with it, but I didn't owe any taxes when I filed. Graduate assistants at my school are exempt from federal taxes as long as they are taking classes at the same time. I was told by the school that if I needed to pay federal taxes, then it would be deducted from the monthly checks.

Edited April 19, 2012 by robot_hamster

[Eigen]

Unless the school is paying your taxes, whoever you talked to was probably not correct. There is no way for a school to "exempt" you from federal income tax other than by paying it themselves.

If you didn't owe anything after reporting all of your income, that's different, but your stipend would have to be really, really small- under 18,000 if you're supporting a spouse who has no income, or under about 9500 if you're single.

Graduate students are exempt from FICA and Medicare while you are full time. You are not, however, exempt from federal income tax. The cut and pasted portion provided above is a good starter, but the IRS also has a very nice publication on Fellowships and Scholarships that should answer all of your questions.

The school does not have to report it as wages paid to you (many don't), but that doesn't mean you don't have to report it. You have to report every source of income, whether it's wages, a fellowship, or a nice sized cash gift.

There are a very few sources of school funding that are not taxable (most mentioned above). The likihood is that you are not on one of those sources.

I'll emphasize the "don't trust your school" line, as the first few people I talked to at my school were incorrect in how my fellowship was taxed (they told me it wasn't, and it was), and had I listened to them I could have incurred quite hefty penalites for non-payment.

Edited April 19, 2012 by Eigen

[robot_hamster]

Unless the school is paying your taxes, whoever you talked to was probably not correct. There is no way for a school to "exempt" you from federal income tax other than by paying it themselves.

If you didn't owe anything after reporting all of your income, that's different, but your stipend would have to be really, really small- under 18,000 if you're supporting a spouse who has no income, or under about 9500 if you're single.

Graduate students are exempt from FICA and Medicare while you are full time. You are not, however, exempt from federal income tax. The cut and pasted portion provided above is a good starter, but the IRS also has a very nice publication on Fellowships and Scholarships that should answer all of your questions.

The school does not have to report it as wages paid to you (many don't), but that doesn't mean you don't have to report it. You have to report every source of income, whether it's wages, a fellowship, or a nice sized cash gift.

There are a very few sources of school funding that are not taxable (most mentioned above). The likihood is that you are not on one of those sources.

I'll emphasize the "don't trust your school" line, as the first few people I talked to at my school were incorrect in how my fellowship was taxed (they told me it wasn't, and it was), and had I listened to them I could have incurred quite hefty penalites for non-payment.

Social security and medicare taxes. Sorry, that's what I meant. I get those confused. Yes, I am exempt from those.

[bluebunny]

Based on 2012 tax tables, your federal taxable income is $29k - $3,800 exemption - $5,950 standard deduction = $19,250, which gives a tax of $2,450 and a monthly net income of about $2,250.

[tomahok]

you guys are the best thank you for the info!!!!

[SlickMcFavorite]

This is the first clear answer I've found to this question! Thank you very much.

No one at my school seems to know the answer to this question either. The payroll people just kept saying "We are not legally authorized to give personal tax advice"