Tax Implications: Stipend & Working Spouse

[aridneptune]

Hello everyone - I'm going to be starting my PhD program in the fall and I have several questions about my stipend. My school does not provide a 1099 or W2 for graduate students on a stipend: it's our responsibility, it seems, to report for ourselves. I believe that, with no tax withholding and more than $1000 owed in a year, one is obligated to file estimated quarterly taxes with the IRS (and the relevant state authority, which in my case will be Illinois). Fine - I'm happy to do that.

I do have one complicating factor: my spouse will be working full-time while I study. For anyone in a similar situation: do you file and pay estimated quarterly taxes for your spouse's income as well? (Note: she will have taxes withheld from her income every pay period). Or only for the stipend income?

Finally, is the tuition waiver also taxable income? I suppose it doesn't matter much as I can simply take a deduction for the full amount (since tuition is deductible).

Thanks in advance for any advice!

[TakeruK]

I think this IRS publication will be helpful to you: https://www.irs.gov/publications/p505/ch02.html. A direct link to the married taxpayers section is: https://www.irs.gov/publications/p505/ch02.html#en_US_2016_publink1000194572.

I believe that if you and your spouse are filing jointly**, then the rules for whether or not you have to pay quarterly estimated tax payments depend on your joint income and joint tax owing. So, this might mean you could, in theory, avoid having to make quarterly tax payments if your spouse has their witholding high enough to cover your stipend too. I'm not 100% sure if this is true though---you should ask a tax expert. Personally, I probably would not choose this option either, I'd say it's better to ensure each spouse either has enough withholdings or pays quarterly taxes so that they each pay enough taxes. This plan is more robust to things like income changing over the course of the year etc.

(**see the links for more information on conditions of doing this; one big one is that both spouses must be residents of the US for tax purposes!)