4 ms·

At least on the NSF GRFP, and at least in my department at CMU, I still received W-2s, and federal deductions happened normally as per my W-4. (The fellowship f

by cfallin 10y ago

At least on the NSF GRFP, and at least in my department at CMU, I still received W-2s, and federal deductions happened normally as per my W-4. (The fellowship funding went through the dept and I was paid by CMU.) Maybe my department is an outlier, though shrug Also, some states treat graduate stipends specially. In Pennsylvania, the stipend is exempt from state and local income tax.

tanderson92 10y ago
I wouldn't say it is an outlier, but I know numerous people with GRFPs in both situations. I used to think that it was better to receive it as W-2 income. Now, with Social Security looking less certain 30 years from now, I wonder who really is in the better position.
- Cyph0n 10y ago
  > Now, with Social Security looking less certain 30 years from now, I wonder who really is in the better position. I'm new to the U.S. tax system. What do you mean by that? Isn't tax mandatory? I mean, either way you're going to have to pay up, be it every month or when tax filing time comes around. I'm actually applying for the GRFP this year, but I'm not sure how my university handles the funds.
  - joeyo 10y ago
    [ The following is not tax advice. ] Stipends are generally considered "awards" and not "wages", so Social Security and Medicare taxes are not withheld. There's no free lunch, of course, because each quarter that those taxes are not withheld are quarters that don't accrue the "credits" needed to qualify for Social Security benefits. This could be an issue for someone who, for example, became permanently disabled at a young age. Most people, of course, will work enough years after graduate school that they will qualify for Social Security benefits, but it is something to consider. I think it's standard at this point for universities to not withhold any tax from stipends (or the stipend portion of a disbursement to a graduate student if they are paid from multiple sources). Of course, income is income, whether it's "earned income" or not: so it's not like there isn't a tax liability just because the university doesn't withhold tax. Note that all this is even more complicated for foreign nationals, for whom some combination of state and federal taxes may actually be withheld depending on the specific tax treaty that applies, the visa status of the student and current IRS policy.
    - dragonwriter 10y ago
      > There's no free lunch, of course, because each quarter that those taxes are not withheld are quarters that don't accrue the "credits" needed to qualify for Social Security benefits. This could be an issue for someone who, for example, became permanently disabled at a young age. Most people, of course, will work enough years after graduate school that they will qualify for Social Security benefits, but it is something to consider. Also, unlike Medicare, Social Security qualification isn't binary, your actual benefits are based on your wage-index-adjusted lifetime SS-taxed earnings, so even if you qualify, the period of not contributing means lower benefits. (Now, if you've also had enough contributions to max out your benefit level, that doesn't matter, but that's a smaller share of people than those that will merely qualify for SS through post-graduation work.)
- deleted 10y ago
  [deleted]

by cfallin 10y ago

tanderson92 10y ago

I wouldn't say it is an outlier, but I know numerous people with GRFPs in both situations. I used to think that it was better to receive it as W-2 income. Now, with Social Security looking less certain 30 years from now, I wonder who really is in the better position.

Cyph0n 10y ago
> Now, with Social Security looking less certain 30 years from now, I wonder who really is in the better position. I'm new to the U.S. tax system. What do you mean by that? Isn't tax mandatory? I mean, either way you're going to have to pay up, be it every month or when tax filing time comes around. I'm actually applying for the GRFP this year, but I'm not sure how my university handles the funds.
- joeyo 10y ago
  [ The following is not tax advice. ] Stipends are generally considered "awards" and not "wages", so Social Security and Medicare taxes are not withheld. There's no free lunch, of course, because each quarter that those taxes are not withheld are quarters that don't accrue the "credits" needed to qualify for Social Security benefits. This could be an issue for someone who, for example, became permanently disabled at a young age. Most people, of course, will work enough years after graduate school that they will qualify for Social Security benefits, but it is something to consider. I think it's standard at this point for universities to not withhold any tax from stipends (or the stipend portion of a disbursement to a graduate student if they are paid from multiple sources). Of course, income is income, whether it's "earned income" or not: so it's not like there isn't a tax liability just because the university doesn't withhold tax. Note that all this is even more complicated for foreign nationals, for whom some combination of state and federal taxes may actually be withheld depending on the specific tax treaty that applies, the visa status of the student and current IRS policy.
  - dragonwriter 10y ago
    > There's no free lunch, of course, because each quarter that those taxes are not withheld are quarters that don't accrue the "credits" needed to qualify for Social Security benefits. This could be an issue for someone who, for example, became permanently disabled at a young age. Most people, of course, will work enough years after graduate school that they will qualify for Social Security benefits, but it is something to consider. Also, unlike Medicare, Social Security qualification isn't binary, your actual benefits are based on your wage-index-adjusted lifetime SS-taxed earnings, so even if you qualify, the period of not contributing means lower benefits. (Now, if you've also had enough contributions to max out your benefit level, that doesn't matter, but that's a smaller share of people than those that will merely qualify for SS through post-graduation work.)
deleted 10y ago
[deleted]