Is PhD stipend on 1099-MISC tax-exempt?
As a PhD student, I receive
a W-2 from my school for services I provide (e.g.research / teaching assistant)
a 1099-MISC, box 3 (Other income) for my PhD stipend, i.e. free money they are giving me that I keep and spend on what I want. It's not tuition-waiver.
I never knew how to treat my 1099-MISC income properly, so this year I decided to go to the IRS Voluntary Income Tax Assistance (VITA) program at my school. They filed a 1040A form for me, and report:
Only my W-2 wage (line 7)
Withheld tax from W-2 and 1099-MISC, combined (line 40)
Therefore, I'm refunded 100% of the withheld tax on my 1099-MISC. Note that I gave them both W-2 and 1099-MISC, and they attached both to the application, so it's not a unconscious mistake.
This answer says that PhD stipend is not subject to self-employment tax. But does it mean it's exempt to ALL tax, as my case seems to suggest?
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Do you get cash (or a deposit into your bank account) of your PhD stipend
and then you immediately send the university a check to pay the tuition fee (which
might be more than the cash you get from the University)? Or does the University
simply keep the stipend money, transferring it from one pocket to another
in essence, and say, OK, you have paid your tuition except for $X that you still
owe us? Or does the university grant you a tuition waiver as part of your
assistantship and reports this as income on Form 1099-MISC? In all of these
cases, the money reported on Form 1099-MISC is not taxable income to you,
and it is neither subject to Self-Employment tax (basically, Social Security
and Medicare tax -- both the employee's share and the employer's share) nor to
(Federal) income tax.
Per IRS regulations, if your stipend is not paying you for qualified expenses (primarily, tuition and books; explicitly not room and board or travel), it is taxable. It doesn't require self-employment taxes (which are Medicare and FICA, normally paid in part by an employer), but it is taxable income from an income tax perspective. You can generally deduct your books and such if you have your receipts - expenses 'required' by the institution for the coursework. Do verify that the amount on the 1099-MISC reflects what you actually received in cash above and beyond the tuition waiver - don't assume the college did this the way you expect, or even properly. Your bank statements should match the amount on the form.
You should definitely include it in your gross income and pay taxes on it. If you received alternate instruction, you should clarify that with the people doing the filing, and follow up with a supervisor perhaps (it's possible the volunteers helping at an event like this aren't familiar with this part of tax preparation).
(Source, in addition to IRS regulations - I was my wife's tax preparer many of the years she was in her Ph.D. program.)
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