See below from National PostDoctoral Organization website.
Bottomline - Like many tax issues,"it depends". Two significant factors come into play - which box the 1099-MISC uses to report the payment and the institution's position. I did a web-search and the first institution I found took the position that payments to post-doctoral students were subject to FICA taxes. I can tell you that the institutions don't want to pay the "employer's share" of FICA taxes because it is an additional expense to them.
FICA and Fellowships
For fellowships paid through the institution, there is some variation on whether the institution should withhold federal employment taxes: social security and medicare taxes (FICA) and unemployment tax (FUTA). A 2005 IRS ruling implies that all postdoc income be subject to these taxes, including postdoc fellowship income; however certain fellowships and traineeships, in particular the NIH National Research Service Award (NRSA), are not because the research conducted by these postdocs is considered non-compensatory (i.e. the stipend is more like a grant than a wage paid for services). Given the initial controversy (and confusion) over these determinations (see articles below), the policies governing those supported on fellowships have been determined on a case-by-case basis by the institution’s legal counsel. Due to these variations, postdocs should check with their own institution’s decision. Initial ScienceCareers.org article (inaccurately) describing the new IRS regulation and its implications:“A Taxing Question on Postdoc Pay: New IRS Regulation Demands Deductions from All Postdocs” by Beryl Lieff Benderly Alerted by tax attorney Bertrand Harding, Jr., that this regulation should not apply to NRSA fellows, ScienceCareers.org later received clarification of this fact from the IRS. A description of this clarification is included in the following articles:
“NRSA Fellows May Be Eligible for Substantial Tax Refunds: Background” by Geoff Davis
“NRSA Fellows May Be Eligible for Substantial Tax Refunds” by Bertrand Harding, Jr.
Self-Employment Tax
It can be a complicated question whether postdocs on fellowships are self-employed and are thus required to pay self-employment tax. Most IRS publications for the average tax payer suggest that if you receive a 1099-MISC form you should be paying self-employment tax. However, being a postdoc is a bit different than being an independent contractor. There are several tax court cases that deal specifically with postdocs and fellowships, primarily Spiegelman v. Commissioner of Internal Revenue (1994, 102 T.C. 394), which says that postdocs supported on fellowships are not self-employed. The crux of most of these arguments hinges on whether or not there is a quid pro quo or employer-employee relationship between postdoc and institution, and typically postdoc fellows are not required to render services to their institution in exchange for their stipend. However, as with paying FICA, this issue can be complicated. The unofficial rule of thumb is that if your salary shows up in Box 7 for “Non-employee compensation” (as opposed to Box 3: “Other income”) there is a higher chance that the IRS will scrutinize your tax return more carefully, expecting you to have paid self-employment tax. Thus, if you are not sure, it is highly advised that you talk to a tax professional.
