Grad school research assitant's w2

Forum|Forum|2 years ago
March 16, 2024
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Someone received a w-2 from a grad school as a research assistant.

The w-2 withheld fed and home state tax(a different state from school's state) but no social security tax withheld. What's the difference between this kind of w-2 and regular w-2?

Thank you.

Opus 17

Level 15

Generally speaking, when a student is working for their school, they are exempt from social security and medicare withholding. The income is considered a student stipend rather than compensation for work performed.

Also generally speaking, you are required to file a state tax return in the state where your permanent residence is located, that reports and pays tax on all your world-wide income, even if you earn income while temporarily working in another state. Depending on the rules of the specific state, you may also be required to file a state tax return in the state where you are living temporarily, and pay income tax only on income earned in that state. Since your home state also taxes you on the same income, it will give you a credit to offset taxes paid to the state where your school is located.

Of course, if your income is less than the filing threshold, you may not be required to file at all. What state is your permanent residence located, where is your school, and what is your total income for the year?

magicstar41000-yAuthor

Level 4

Opus 17,

Thank you very much for your explanation.

The school is in PA. Income withheld on the w2 is reported to MA. Total income level requires to file tax return, but don't need to file tax return for PA?

Thank you!

Opus 17

Level 15

Thank you very much for everyone's help. I am sorry for the confusions I may have caused. I did not have all the facts on hand before. I am much cleared now.

Hal_AI, you are correct about the w2 part - amount of stipend.

As for the 1098-T part, Turbotax did ask if the scholarship was reported on w2. It was not reported on the w2 so it treated as extra income. The w2 and the scholarship amount are not the same.

I got a copy of the pay stub. It has few sections. Under the Earnings section：

Stipend -PA tax exempt $$$(1)

Student fee(Nontaxable) $$$(2)

Student Tuition $$$(3)

Under Post Tax Deductions section, it lists

Student fee deduction $$$(4)

Tuition deduction$$$(5)

(4) and (5) are the same as (2) and (3). They are deducted from earnings. Last section on the pay stub is the taxable wages $$$(6) which is the same as the Stipend amount(1) in the earnings section.

Since it says "PA tax exempt" so the student is not required to file PA tax return, correct? Taxes are withheld for federal, MA state and PA LST -PITTS.

Form 1098-T is to get tax credit. Since no credit will be given to grad student so delete it. I thought 1098-T needs to be reported.

Again, thank you all for your help.

@magicstar41000-y

No, please stop. You are making this way too complicated.

If you want to understand why the school did things a certain way, ask the school, only they can tell you.

For your child's income taxes, you should:

1. Ignore the pay stub. The only thing that counts is the W-2.

2. Ignore the 1098. Your child did not pay any tuition, therefore they are not entitled to any tax credits.

3. As to whether the income is taxable in PA, you must consult the PA instructions. In most states, this would be taxable income on a non-resident return. However, after doing some extensive research (you're welcome) I found this.

Stipends

Pennsylvania-Taxable
Stipends paid to medical interns and residents pursuant to an internship or residency program that conforms to the Essentials of an Approved Internship or the Essentials of an Approved Residency as established by the American Medical Association are taxable.
Pennsylvania Nontaxable
Fellowship awards and stipends do not constitute taxable compensation for services if the recipient is required to apply his skill and training to advance research, creative work, or some other project or activity, and the recipient can show that:
- The benefits resulting from the services of the recipient are so minimal, given the actual services performed or expected to be performed, that they constitute no realistic basis for compensation by the institution sponsoring the fellowship or stipend; or
- The activities of the recipient are so closely and directly supervised and immediately controlled by regular faculty members so as to constitute a burden on the institution which would offset any benefit it receives from the recipient's activities; or
- The recipient is a candidate for a degree and the same activities are required for all candidates for that degree as a condition for receiving such a degree.