Graduate student with fellowship and teaching assistant income - how to report?

[gradstudent123]

I am a graduate student and in 2015 I had only fellowship income and didn't receive a W2 or 1099. So I reported this on 1040EZ on line 1 with "SCH" written on the left. I believe this was the correct way to go about it.

Now in 2016, I had the same fellowship income, but also an additional $2000 from serving as a teaching assistant. It's still unclear to me if I will receive a W2 for this income (I assume I will). No taxes were withheld from either fellowship or TA income, but I have paid quarterly estimated taxes. My question is, how/where do I report my income for 2016? Do I just lump the 2000 with the rest of my stipend on line 1? Can I still use 1040EZ? Is this going to be subject to more taxes than the fellowship stipend?

Bonus question: I assume the ~$2000 will allow me to contribute $2000 to a Roth IRA?

[GeoffreyG · Accepted solution]

The answers to your several questions are yes.

With respect to your academic income, your university will (or should) use a different reporting process for fellowship income than it does for teaching assistant income.  You are indeed correct that fellowship income does not require the payer to issue a W-2, although it is taxable income to the payee, unless used directly for school tuition.  The taxpayer reports this income to the IRS by marking "SCH" next to the wages and income line on their tax return.  For graduate teaching assistant duties, your university should issue you a standard W-2; at least they're supposed to.  That wage income then gets combined with your "SCH" income and is totaled together on the same tax return line (both types of income are taxed at the same marginal tax rate).

So, basically, you will just do what you described you did last year.  However, rather than combining the two items into a single software entry (i.e., adding $2,000 to the other figure, as you suggest you might), we would respectfully recommend against doing that.  Although it's taxed the same way, the W-2 figures you have, or that you will get, should have amounts for Social Security and Medicare taxes (W-2, Boxes 4 and 6).  If those calculations don't match your W-2 Box 1 (wage) income, then the tax software may raise additional questions, making it harder for you to complete your tax return.  To avoid that hassle, simply make (2) separate entries:  (1) for fellowship income and (1) for teaching assistant income.

It won't change your taxes, but may make it easier to file.

You can report both income items simultaneously on the wage and income line of Form 1040EZ (using also the code "SCH"), according to the IRS instructions.  You could do this by hand, with paper and pencil, or you could file using TurboTax Free.  Both ways should be very easy.

Finally, yes, your $2,000 in teaching assistant income will allow you to contribute to a ROTH IRA, as the $2,000 is considered "Earned Income," which is what the law requires you to have before you can put money into such an account.

Thank you for asking this important question, and good luck with your graduate studies!

[cmulter]

Thorough answer, but I have a follow-up question. The $2,000 he has would be taxable by the state, too, but the fellowship would not be (at least in NJ). Will turbotax handle that correctly, Geoffrey, if it is input as you describe in your response?