Key Tax Issues for Fellowship Stipend Recipients 

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I.    Taxability of Payments 
II.    Quarterly Estimated Tax Payment Requirements 
III.    Reporting Fellowship Stipends and Estimated Tax Payments on Form 1040 and 1040NR 
IV.    City of St. Louis Earning Taxes 
V.    Where Can You Get Information and Assistance?
VI.    Fellowship Stipend General Information Packet
 

I.    Taxability of Payments 

A.     Fellowship stipend payments received and applied by the recipient to tuition and fees required for courses of study, books supplies and equipment required for a course of study are not taxable and are not reported to the IRS. You should keep receipts for these expenses as part of your tax records.

 

B.     Fellowship stipend payments used to pay living expenses, health insurance, travel reimbursements, research allotments, relocation expenses and similar uses, are considered nonqualified scholarships and constitute taxable income. Your taxable fellowship stipend amount also includes payments or reimbursements by your department for the cost of equipment purchased for you, relocation expenses, and additional travel or research awards. The total amount of your taxable fellowship stipend payments and taxable reimbursements will be reported to you on a Fellowship letter from the Tax Department. 

i.        If your fellowship stipend payments were paid through the Payroll system, this letter is made available to you online through the University’s Human Resource Management and Self Service System (HRMS) in mid-January.  You will need your WUSTL key and password to access the letter.  For assistance with accessing the letter through HRMS, contact the Help Desk at (314) 935-5707.

ii.      If your fellowship stipend payments were limited to one or two payments and were not made through the Payroll system, a letter will be mailed in mid-January to the address currently on file. Be sure to update your address with your department if you move!

 

C.     Washington University fellowship stipends are not compensation for services (wages) when provided as part of a training program. Therefore, the University cannot withhold taxes except for payments to international fellows. The University will withhold taxes on wages earned from providing services.

i.        Because fellowship stipend payments are not considered compensation, wages, or “earned income” they cannot be used to claim certain tax credits or to make contributions to either traditional or ROTH IRAs or Keogh plans.

 

D.     If you have an employee appointment as well as a fellowship stipend appointment, compensation or wages for services unrelated to your fellowship are taxable and will be reported to you on a W-2 or, if you are a nonresident alien for US tax purposes, a Form 1042-S.

i.        These forms are issued to you via HRMS or US postal service from the Payroll Department. For information regarding these forms, contact Payroll at (314) 935-9835.

 

E.      Annual awards and payments aggregating over $600.00 for services as an independent contractor or human subject will be reported to you on Form 1099-MISC.

i.        Forms 1099 are mailed by the Tax Department in mid-January to the address currently on file. Be sure to update your address with your department if you move!

 

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II.    Quarterly Estimated Tax Payment Requirements 

A.     The University’s Tax Department website contains comprehensive information regarding calculating and paying federal and state estimated taxes and filing tax returns.

 

B.     US tax residents, permanent residents and citizens may be required to make Federal and State estimated tax payments.

 

C.     International fellows will have their fellowship payment reported to them on a Fellowship letter from the Tax Department, unless their tax treaty requires the University to withhold taxes, in which case the payments will be reported to the fellow on Form 1042-S. Fellowship payments that require withholding will have the required Federal taxes deducted from the Fellowship stipend payment and reported on Form 1042-S, but the Fellowship stipend recipient is responsible for making estimated tax payments to the State of Missouri.

 

D.     When calculating your estimated tax requirements be sure to take into account your income and withholding from all sources when completing the Federal estimated tax worksheet and Missouri estimated tax worksheet found in the instructions.

 

E.      Failure to pay estimated taxes when required can result in an underpayment penalty. Your total estimated tax payments should be at least 90% of your current calendar year tax liability or 100% of your prior year tax liability. 100% of your prior year tax liability would be the amount from your prior year Form 1040, Form 1040A, Form 1040EZ, Form 1040NR or Form 1040NR-EZ.

 

F.      The State of Missouri follows the Federal government in its requirements for estimated tax payments that is, 90% of your current year tax liability or 100% of your prior year tax liability. 100% of your prior year tax liability would be the amount from Form MO-1040A or Form MO-1040. If you lived outside of the State of Missouri during the prior tax year you will need to pay at least 90% of your estimated current year tax liability. Estimated payments are made on Form MO-1040ES. Part year residents should calculate their Missouri percentage on Form MO-NRI.

 

G.     For Federal income tax forms, instructions, and Publication 970, Tax Benefits for Education, visit the IRS website (http://www.irs.gov) and for similar state materials the Missouri website (http://dor.mo.gov/).  Also see the fellowship stipend packet in Part VI below for additional guidance.

 

H.     Estimated tax payments for any calendar year are due April 15 for the first quarter, June 15 for the second quarter, September 15 for the third quarter, and January 15 of the following year for the fourth quarter.

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III.    Reporting Fellowship Stipends and Estimated Tax Payments on Form 1040 and 1040NR 

A.     The Tax Department letter will report to you the total of your Fellowship stipend. (See Parts I-B and II-C above.)

 

B.     Qualified expenses you paid (see Section I.A.) should be applied to reduce the total fellowship stipend, to determine the taxable amount. This reduced amount is to be added to all other W-2 wages.

 

C.     Place the total of all W-2s and your taxable fellowship stipend on Line 7 of Form 1040 or Form 1040A. Write SCH and the amount of the fellowship stipend on the dotted line beside the box 7 of Form 1040 or Form 1040A (SCH $xx,xxx).*  (Click here for example)  You cannot file using Federal Form 1040EZ when you are receiving fellowship stipend payments.  Place total of all 1042-S forms on Line 12 of Form 1040NR or Line 5 of Form 1040NR-EZ.  Non-resident aliens should only enter the amount shown as taxable from their 1042-S on Form 1040NR or Form 1040NR-EZ.

*- When using tax software, report this amount as taxable “scholarship” income or similar description as provided. Do NOT report as “substitute W-2” or "substitute 1099."

 

D.     Report your estimated tax payments on the appropriate line of Form 1040 or Form 1040A. Taxes from Form 1042-S are reported on Form 1040NR or Form 1040NR-EZ.

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IV.    City of St. Louis Earning Taxes 

The City of St. Louis imposes an earnings tax on “salaries, wages, commissions and other compensation” earned by residents of the City and nonresidents for work done or services performed or rendered in the City.  In July 2012 the Collector of Revenue issued a statement that stipends fall under the category of “other compensation.”  Employers who employ individuals subject to the tax are required to withhold and remit the same to the Collector of Revenue.  Historically, Washington University has not withheld the earnings tax on stipends paid to its students.  Please consult your tax advisor regarding whether your fellowship income may be subject to the City of St. Louis Earnings Tax. 

 

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V.    Where Can You Get Information and Assistance? 

       A.     Federal Tax Agency Resources

·         Internal Revenue Service Website (http://www.irs.gov)

·         Internal Revenue Service main customer service line (1-800-829-1040) 

       B.     State Taxing Agencies

·         Department of Revenue, State of Missouri (http://dor.mo.gov/)

·         State of Missouri local tax information line (314-877-0177)

·         State of Missouri local office for individual help:

·         Missouri Department of Revenue

3256 Laclede Station Road Suite 101

Maplewood, Missouri 63143

·         For other states’ taxing authorities the AICPA provides a page with links to all 50 states’ Departments of Revenue or similar tax agencies on their page:
Taxes–States–Departments of Revenue Links 

       C.     Helpful Publications from the Internal Revenue Service

·        Publication 970- Tax Benefits for Education

·         Publication 513- Tax Information for Visitors to the U.S.

·         Publication 519- U.S. Tax Guide for Aliens

·        Publication 901- U.S. Tax Treaties

       D.     Other Websites

·         Missouri Society of CPAs http://www.mocpa.org/forthepublic/find-a-cpa

·         Missouri Society of Accountants http://www.missouri-accountants.com/

·         Society of Enrolled Agents http://www.naea.org/ 

       E.     Washington University Tax Department

·         Angie Leahy, Tax Manager                       314-935-8283

·         Tax Department Website                           http://www.tax.wustl.edu

 

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VI.    Fellowship Stipend General Information Packet 

The fellowship stipend packet is provided for general information purposes only. The packet contains IRS publication excerpts as well as examples of filing scenarios designed to assist fellowship stipend recipients in understanding some of the tax issues and reporting rules relevant to fellowship stipends. It is not intended to be a comprehensive guide to tax reporting; nor should it be used as definitive tax guidance. Washington University does not advise on any personal income tax requirements or issues. Use of any information from the packet or the Tax Department website is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek the guidance of a professional tax adviser who is familiar with all the relevant facts of your specific circumstances.                 

 

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In accordance with the requirements of the U.S. Treasury Department, this communication is not intended or written to be used, and it cannot be used by any taxpayer, including the person to whom it is addressed, for the purposes of avoiding federal tax penalties that may be imposed on the taxpayer. This statement is intended to comply with Section 10.35(b)(4)(ii) of Circular 230, 31 C.F.R. Part 10.

 

 

Updated May 2013

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