@melissaforpeace315 wrote:
@Opus 17 Hi! I was reading your statement about how being a teacher's assistant might not even count as compensation and that "even if you are paid extra, it is considered part of your education. If participating as a teaching assistant is not required, or if you teach additional classes beyond the degree requirement, payment for that participation would be considered compensation."
How do I know if I fall under the category of "education" or "compensation"? I mean I'm paid every two weeks just like any other TA is supposed to be paid in my department. I mean my Ph.D program DOES require all Ph.D students to be a TA in a particular class. What are the indicators that my job as a TA is considered part of "education" versus "compensation"? How do I know for sure what category the IRS has my job listed as? I mean I presume I can ask my school administratraion / payroll department but I have a good feeling that they don't know this or are not very smart about this stuff (I've communicated with them regarding other situations / questions before and they were not very helpful at all)
Lastly, if my TA job is indeed categorized as "compensation" (rather than "education"), what documentation do I need to provide to the IRS come tax filing time? Just so that they won't penalize me for contributing to the Roth IRA?
I really appreciate your help!
This is a really complicated area, and I'm sorry your own payroll department is unclear.
The simplest test of whether income is compensation is that it is subject to social security and medicare withholding. However, as a student, your stipend is exempt from this withholding, and even if you were being compensated for working, you are exempt from SS and medicare withholding if you are working for your school. So your W-2 will probably have boxes 3-6 blank, and this may cause the IRS and Turbotax to believe you don't have compensation from working, even if it is compensation.
Many schools have switched to paying their graduate students on a 1099-MISC, counting the money as a student stipend rather than wages. In this situation, the school would issue a separate W-2 that would only include wages earned from working, separate from the degree program. (Like, working as a library assistant.) In this arrangement, the school would not issue a W-2 for TA earnings if it was required for your degree, but would issue a W-2 if you performed extra TA duties beyond your degree requirement.
Further complicating matters, there was a tax law change in 2019 so that graduate fellowships are considered "compensation" for making IRA contributions even though they are not "earned income" for any other purpose.
Certain taxable non-tuition fellowship and stipend payments. For tax years beginning after 2019, certain taxable non-tuition fellowship and stipend payments are treated as compensation for the purpose of IRA contributions. Compensation will include any amount included in your gross income and paid to aid in your pursuit of graduate or postdoctoral study.
There are so many graduate student arrangements, it is difficult to give a precise answer without knowing exactly what is going on. Most of my experience is in the biomedical sciences, where students get their tuition "comped" by the school (via grants, mostly) and the students also get a stipend (also mostly funded from grants via the PI or mentor). Things may be different in other programs where the student pays their own tuition, but may then receive a stipend to offset the tuition for being a TA or performing other services.
Lastly, as of 2020, turbotax did not recognize fellowships as "compensation" for IRA contributions and would raise an error. I haven't checked what it will do for 2021, and I don't remember the fix for 2020.
See what you can make of the above information as applied to your situation, and feel free to come back for further clarification.
