Fellowship Stipend

[Garychen]

Hello, I am receiving a fellowship stipend which I believe is not considered wages and we are required to pay our quarterly taxes on our own. I have a moonlighting position at another employer (Locums) where I do a shift every now and then and those would be considered wages. Do I pay no FICA tax on the stipend and yes FICA tax on the Locums? How do I fill out the tax form to account for the differences when I pay quarterly 

taxes? 

[marctu]

So, the easy one is the moonlighting position.  Since you are a W-2 employee, both FICA (Social Security and Medicare) will be withheld by the employer, and the employer will remit both your portion 7.65% and their portion 7.65%.  To the extent income taxes are withheld these will be remitted as well.

Generally, Stipend payments are considered taxable income and are not excludable. However, amounts spent in the calendar year for fees, books, supplies and equipment that are required of all students enrolled in the course(s) in which the student is enrolled may be excludable.  

 In order to be able to exclude scholarship and fellowship benefits from your taxable income, they must be used to pay qualified education expenses, including: Tuitions and fees required to enroll and attend an eligible educational institution; Course-related expenses, such as books, supplies, and equipment used in the course, and any special fees. These expenses must be required of all the students in the course. 

In order to qualify as tax-free, the scholarship or fellowship cannot require that it be used to pay for other expenses such as room and board. Expenses that Do Not Qualify Expenses that do not qualify include: Room and board; Travel; Research; Clerical help; and Equipment and other expenses not required for attendance.

A stipend is generally is exempt from FICA/Medicare tax while student is a “full-time” graduate student.

Though if part of your scholarship or fellowship included compensation for your work as an independent contractor, you will have self-employment income. In this case, you will have to file Schedule SE and pay self-employment tax, in addition to federal income tax, on your earnings. As an independent contractor, you may also have related business expenses and could file Schedule C, Profit or Loss from Business.

Thank you so much for your question  @Garychen 

Be well and safe!

Marc T.

Turbo Tax Expert

27 Years of Experience Helping Clients

[Cindy4]

The portion of the stipend that is not used for qualified educational expenses may be taxable.  to deteremine the amount of income tax you would owe, you would need to calculate which tax bracket your in.  If you are a student employed by the school where you are pursuing a degree as a full-time student, you wouldn't be subject to the FICA tax, only income tax on the stipend.

If the employer is a W-2 employer, they should be withholding your FICA tax and making the payments on your behalf each quarter.  If you are not receiving W-2 wages, then yes youwill want to include FICA as part of your estimated tax liability on that income.  Here is a good resource for calculating estimated payments.

You can make estimated payments directly to the IRS by these methods. 

Hope this helps!

Cindy