Author Topic: Federal taxes and graduate stipend?  (Read 1096 times)

TheGadfly

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Federal taxes and graduate stipend?
« on: November 30, 2016, 10:49:39 AM »
My wife was lucky enough to get a full scholarship and monthly stipend for her two years of graduate work. For some reason, in 2016 the university only withheld 3.5% in federal tax from her monthly check (instead of the ~10% we are used to seeing). Neither of us noticed this at first but now that I'm estimating our 2016 return, we will owe about $450 to the government.

The numbers (This is Jan-April 2016, she graduated in May)

Gross........................$6772
pretax deduction............$171
Fed taxes.....................$240
FICA..............................$0
State taxes...................$280

Questions:

- Did the university minimize the amount of federal taxes taken from the stipend by default? My wife only claimed 1 exemption on her W-4.

- Is her stipend exempt from FICA tax?

- Anything I should know before I file my taxes? Should I just expect to pay-up for the taxes we owe? Other options?

Thanks in advance!




TheGadfly

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Re: Federal taxes and graduate stipend?
« Reply #1 on: November 30, 2016, 11:01:56 AM »
Also, in case you are wondering, the university doesn't address this issue on their website and i have yet to receive a response from the payroll office.

BigRed

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Re: Federal taxes and graduate stipend?
« Reply #2 on: November 30, 2016, 12:49:57 PM »
As a full-time student, graduate stipends are exempt from FICA.

If her stipend amount didn't change and her W-4 exemptions didn't change, the withholding shouldn't have either, they should just use the standard formula.  Go to paycheckcity.com and see what their calculation is.

Typically, any stipend that goes towards student health insurance is taxable - so pay attention to that.

Graduate student tax rules are complicated and the University is generally prohibited from providing tax advice, which is why it is hard to find any resources.  There may be a VITA chapter at your wife's University, they may be able to help, but my experience was they were not very good at one student/one full-time worker married couple issues, especially if the spouse was an above median income earner.

It looks like this isn't the first year, so hopefully it's not all unfamiliar territory at this point.  My wife also graduated this year after 6 years, and I think by last year, I finally had it all figured out, though her income mix, and mine, was different every year.

TheGadfly

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Re: Federal taxes and graduate stipend?
« Reply #3 on: December 05, 2016, 10:26:17 AM »
As a full-time student, graduate stipends are exempt from FICA.

If her stipend amount didn't change and her W-4 exemptions didn't change, the withholding shouldn't have either, they should just use the standard formula.  Go to paycheckcity.com and see what their calculation is.

Typically, any stipend that goes towards student health insurance is taxable - so pay attention to that.

Graduate student tax rules are complicated and the University is generally prohibited from providing tax advice, which is why it is hard to find any resources.  There may be a VITA chapter at your wife's University, they may be able to help, but my experience was they were not very good at one student/one full-time worker married couple issues, especially if the spouse was an above median income earner.

It looks like this isn't the first year, so hopefully it's not all unfamiliar territory at this point.  My wife also graduated this year after 6 years, and I think by last year, I finally had it all figured out, though her income mix, and mine, was different every year.

Very helpful! Thanks!

BigRed

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Re: Federal taxes and graduate stipend?
« Reply #4 on: December 06, 2016, 01:34:21 PM »
Very helpful! Thanks!

Glad to hear it.