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FELLOWSHIP AND TAX QUESTION

PostPosted: Wed Oct 05, 2005 6:20 pm
by julie
Recently I have been awarded an NSF postdoctoral fellowship and I am going to start the fellowship in a few months.

I have several questions about taxation but I have been told that NSF doesn't give tax advice and I talked to some tax advisors and they seem not to know much about fellowships.

If any body has worked in NIH/lived in the state of Maryland and had similar situation, can you recommend tax advisors who have good knowledge about this situation.

Thanks

FELLOWSHIP AND TAX QUESTION

PostPosted: Wed Oct 05, 2005 7:39 pm
by Emil Chuck
I'd suggest you look up someone or some organizations who can give informal advice on the matter... specifically check with your local postdoctoral office/association. You can also peruse the National Postdoc Association's website for info about taxes which might be useful.

But yes, you should be aware of the tax issues with your fellowship and adjust appropriately.

FELLOWSHIP AND TAX QUESTION

PostPosted: Wed Oct 05, 2005 9:32 pm
by Andy Spencer
Julie,

You don't need a tax advisor. This can be figured out on your own. Most postdocs with their own money go through this.

Here's the deal: There's a rule that says you need to pay "estimated taxes" if taxes are not taken out of your check each month.

BUT, you only need to start paying estimated taxes if you had a tax liability in the prior tax year. So, if you got a refund last year, then you don't have to pay estimated tax this year. Go to www.irs.gov and search "estimated taxes." Read for a while. If you still have questions, come back here and ask. I did this for three years and my wife is in the second of three years herself.

Mainly just a pain. Not worth paying a tax advisor (unless you have a very complicated tax life outside of the fellowship).

Best regards,

Andy

FELLOWSHIP AND TAX QUESTION

PostPosted: Thu Oct 06, 2005 6:38 pm
by julie
Thanks for the reply. I will read the suggested websites and will try to get more information.

Basically my questions are:

1) Are NSF postdoctorl fellowships are subject for FICA (social security tax) and FUTA (Unemployment tax)?

2) If my fellowship is not subject to FICA, can I still make an IRA contribution?

2)Do I have to pay state tax?

3)My fellowship contains a stipend and research allowance which is directly going to be paid to me. Is the research allowance subject to tax? I am assuming it is not, how do I show that it is not a personal income?


FELLOWSHIP AND TAX QUESTION

PostPosted: Thu Oct 06, 2005 6:55 pm
by Andy Spencer
1) Are NSF postdoctorl fellowships are subject for FICA (social security tax) and FUTA (Unemployment tax)?

No.

2) If my fellowship is not subject to FICA, can I still make an IRA contribution?

Yes. Use a Roth IRA for the best tax advantages.

2)Do I have to pay state tax?

Usually. Varies by state.

3)My fellowship contains a stipend and research allowance which is directly going to be paid to me. Is the research allowance subject to tax? I am assuming it is not, how do I show that it is not a personal income?

Just don't claim it. It is paid to the university. The university should give you a piece of paper at the end of the year indicating how much you've been paid. Not all universities do this because they're clueless. Just keep records of your paychecks, report what you get, pay estimated taxes when required, and you'll be fine.

BTW, congratulations on getting the fellowship.

Andy

Tax advice is tricky

PostPosted: Thu Oct 06, 2005 9:50 pm
by Jim Austin
Hi Julie,

I won't disagree with Andy when he says you don't need a tax counselor; I'll leave that up to you. I will however--while emphasizing that I am not a tax accountant or lawyer--say that I'm not sure he's right about FICA and FUTA. If you were paying attention to Science's Next Wave earlier this year you would have seen our report saying that starting on 1 April NIH postdoc fellows would have to start paying FICA and FUTA. Well, we were wrong; there was no such change.

But in the course of doing research for a followup article to correct the record, I came to understand--coached by a prominent tax attorney who has written a book about university tax law--that the treatment of NIH fellows is singular and, indeed, inconsistent with generally established case law. Put another way, NIH fellows don't owe FICA or FUTA because they have a special, informal exception. In a nutshell, it's because IRS once decided that NIH fellows DID owe FICA and FUTA and people in Congress started yelling at them...and they changed their mind. They've been a special case ever since.

Generally--this is my understanding of the IRS position--fellowships are taxable unless they resemble NIH NRSAs very closely. Cases are actually argued and decided on the basis of whether a particular fellowship resembles an NRSA. I really am not sure whether NSF fellowships have been found to be exempt; I will say, however, that most postdoctoral fellowships--excepting only NRSAs and their close analogs--are indeed FICA and FUTA taxable. Not saying Andy's wrong here--for all I know he may be a tax attorney--but be careful.

That is my non-expert opinion. You should consult an expert...though not necessarily one you'd have to pay.

Be Well,
Jim Austin

Thanks Jim!

PostPosted: Thu Oct 06, 2005 11:06 pm
by Andy Spencer
Jim and Julie,

Please note that all the advice given above is known from my personal experience with NRSA! Not NSF! I think they are equivalent but cannot be sure.

However, all the information you need can be gathered from the irs.gov website. The financial services companies in our society have convinced 99% of people that we are too naive to handle our of financial dealings. This is not high tax law. Just figure out where your fellowship fits in, and pay accordingly.

Thanks Jim for pointing that out . . . I forgot she was NSF and not NSRA. Good catch!

Andy

taxes

PostPosted: Fri Oct 07, 2005 10:35 am
by Abby
If you don't want to do pen and paper or pay a person, online tools like Turbotax can help alot. They ask you questions and fill in the correct spaces on the 1040. I was a fellow at NIH- similar taxable grant thing- and turbotax correctly inputed the payment.

Re: FELLOWSHIP AND TAX QUESTION

PostPosted: Fri Sep 18, 2015 10:51 pm
by E. Cramer
Julie,

I know its been some years but obviously you went through the NSF process. I started my fellowship in September and know that I will have to pay estimated taxes in January. My questions are

1) Do I have to pay social security or medicare on either the stipend or allowance?

2) How do I treat the allowance? Is it all taxable income?

This is a big headache, any advice would be great.

Thanks!

Re: FELLOWSHIP AND TAX QUESTION

PostPosted: Mon Sep 21, 2015 7:36 am
by Dave Walker
E. Cramer wrote:Julie,

I know its been some years but obviously you went through the NSF process. I started my fellowship in September and know that I will have to pay estimated taxes in January. My questions are

1) Do I have to pay social security or medicare on either the stipend or allowance?

2) How do I treat the allowance? Is it all taxable income?

This is a big headache, any advice would be great.

Thanks!


Hi E. Cramer,

Thanks for your post! And double thanks for taking the time to search the archives where there is such good advice from long ago.

The post you have replied to appears to be about 10 years old; if any of the people are still around I am guessing the tax law is probably different between now and then! I don't think you will get a reply from them. These old posts, to my understanding, are mostly for historical purposes (some career advice is indeed evergreen).

I hope it's not unhelpful for me to also suggest talking to someone at your institution, be it a postdoc association, administrative assistant, or HR department. (As a grad student we actually arranged someone from H&R Block to give new students a presentation on this stuff, because it's completely confusing.) Because tax laws vary between states and your life situation, even the original poster's comments were tough to answer definitively. I would hesitate on giving you even anecdotal advice because it could be completely incorrect.

Unfortunately, the only source material that is trustworthy is the IRS tax code itself. If you have the time, you can always read it online. Here is the section on "education" taxation: http://www.irs.gov/publications/p970/index.html