Important note: The following contains general tax information for graduate students. It is not meant to replace the advice of a tax professional or assumed to be error-free. For specific questions about your tax responsibilities, please contact the Internal Revenue Service, an accountant, or an income tax service.
Is my stipend taxable?
Being a student does not automatically exempt you from having to pay taxes. All of your earnings are subject to both federal and state income taxes. Generally, any scholarship, grant, or fellowship dollars used to pay housing, food, or living expenses are taxable. All stipend payments (service and non-service) must be reported to the U.S Internal Revenue Service (IRS) by both domestic and international students, regardless of whether you received a tax statement from the University. Your tax liability will be determined by the IRS when you file your tax return. If you had taxes withheld by the University, the withholdings will reduce the amount you owe to the IRS and may increase your refund if you are eligible for one.
Why did the University withhold taxes?
There is a difference between tax liability and tax withholdings. Having taxes withheld does not mean that your stipend was reduced. For a complete breakdown of your earnings, taxation, and deductions, please refer to the descriptions and amounts on your salary statement. The University may withhold taxes on your earnings and pay it to the U.S Internal Revenue Service (IRS) on your behalf, per IRS guidelines. If this is the case, you will receive a tax statement (W-2, 1042-S, or 1099) at the beginning of the next calendar year. More information regarding these statements can be found in the questions below.
Why did I have more taxes withheld than expected?
Students who received a bulk payment (“back pay”), which consists of multiple weeks of payments combined into one check may have more taxes withheld than expected. There are many reasons why students could receive a bulk payment, for example when a student’s job was set up in the University’s Student Employment System after they had already started working.
Each time you are paid, in accordance with tax regulations, your earnings are projected across a 52-week period to project what your earnings would be for a year. That total is then used to determine where your income would fall into the overall tax table to determine the rate at which you should be taxed. Since your earnings in the week’s pay were greater than the amount you received previously, your earnings projected into a higher tax bracket which means a higher percentage of tax was withheld. When students file their taxes the next calendar year, it is possible to receive a portion of these earnings back.
If you work during the summer, you will also have Social Security and Medicare taxes (also known as FICA) withheld from your paychecks (please refer to “What is FICA” below).
How do I change my withholdings?
If you provide service to the University (as a teaching fellow, research fellow, grader, or graduate assistant) your tax withholdings can be adjusted by updating your federal and state tax withholding certificates (W-4 and M-4 forms respectively), depending on your student status.
Domestic students are able to update their federal (W-4) and state (M-4, specifically Massachusetts) tax withholding certificates through the BUworks Central Portal. Instructions can be found on the Student Employment Website.
International students should also refer to the information provided by the Student Employment Office.
If you receive a non-service stipend, the University does not withhold taxes for U.S. citizens & permanent residents. International students have 14% withheld in taxes. This rate cannot be changed unless the student can claim a tax treaty exemption. International students with questions about their tax withholdings should contact the Payroll Office at firstname.lastname@example.org.
What is FICA?
The Federal Insurance Contributions Act (FICA) mandates a mandatory payroll tax to fund Social Security and Medicare. During the academic year, students who are enrolled at least half-time or certified full-time and who are working on campus are exempt from FICA (Social Security and Medicare) deductions. FICA is withheld from all students working on campus during the summer; however, they may qualify for a FICA Rebate based on their summer registration status. The rebate is usually issued in October.
Will I receive a tax form for my stipend (W-2, 1042-S)?
If you provide service to the University (as a teaching fellow, research fellow, grader, or graduate assistant) you received a salary in exchange. Service stipends are considered earned income for tax purposes and the University will withhold and report the earnings per IRS guidelines based on your W-4 selections. You will receive form W-2.
Non-service stipends are funds used to support a student in their course of study. The IRS considers these amounts to be taxable income and you are responsible to report them on your tax return, regardless of your citizenship. The University does not withhold taxes for U.S. citizens & permanent residents and they will not receive a tax withholding statement from BU. International students have 14% withheld in taxes and will receive form 1042-S, unless they can claim tax treaty exemption. International students with questions about tax withholdings should contact email@example.com.
What kind of tax documents could I receive?
Depending on the aid and the type of fellowship a student had during the previous calendar year, students may receive one of the following tax documents:
- W-2: All students who received a salary for services rendered and who were paid through the University’s Student Employment System will receive a W-2. Examples include a teaching fellowship or research fellowship: https://www.bu.edu/seo/students/getting-paid/taxes/w-2/.
- 1042-S: This form may be issued to international students who received a non-service stipend. Non-Service Stipends are a form of payment whereby the person is not required to do any kind of work (past, present, or future) as a condition of receiving the payment. Non-service stipends are awarded as a means of assisting an individual in pursuing academic study or research. Therefore, students will not receive a W-2 or 1099 for a non-service stipend: https://www.bu.edu/seo/students/getting-paid/taxes/1042s/.
- International students receive a 1042-S because the university withheld taxes.
- Domestic students do not receive any tax document for non-service stipends because the University did not withhold taxes.
- 1099: A 1099 is used to report miscellaneous payments made to non-employee individuals for services rendered.
- 1098-T: This is a tuition statement to report tuition charged and (federal and/or institutional) scholarships received/applied. It helps to determine if the student qualifies for an education credit to lessen their tax burden: https://www.bu.edu/studentaccountingservices/resources/irs-form-1098t/.
- Please note that the 1098-T is a tuition statement that’s used during tax preparation to see if the student qualifies for an education credit to lessen their tax burden. All students receive them. See: https://www.irs.gov/forms-pubs/about-form-1098-t.
- There are potentially many reasons for a discrepancy between the statement and what you see in the student link. The amount in Box 1 only represents amounts paid for Qualified Tuition and Related Expenses (QTRE) and does not include payments made for room and board, insurance, health service fees, or parking which, though important, are not considered mandatory education expenses for tax purposes.
- Form 1098-T reports amounts that the student paid in a certain year, and the pay date does not necessarily correspond to the dates that the classes were attended. For example, tuition for the Spring semester is typically billed in November so a student may have paid tuition for the Spring semester in 2020 despite the fact that classes didn’t start until 2021. The best and most accurate source of information about the amounts that you paid for qualified tuition and related expenses will be your student link.
How do I report my non-service stipend?
Citizens, Permanent Residents, and Resident Aliens for U.S. Tax Purposes
Non-stipends are treated as taxable scholarships for tax purposes. Per IRS Publication 970, taxable scholarships and fellowships should be reported on the tax return as follows:
- Form 1040 – Line 1; also enter “SCH” and the taxable amount in the space to the left of line 1.
- When using tax software to prepare your tax return, be sure to classify the income as taxable scholarship income. Other terminology that software providers may use to describe this income includes nonqualified scholarships, taxable fellowships, nonqualified fellowships, taxable grant income, and other similar phrases. This type of income is often difficult to find in the software because it is uncommon.
- Do not instruct the software that your stipend is substitute W-2 or substitute 1099 income. Those types of income are taxed differently than taxable scholarship income and could cost you much more in tax.
- When engaging a professional tax preparer to prepare your return, be sure s/he is aware that this is taxable scholarship income. Tax preparers are just like everyone else; they can’t know everything, and there is a good chance they have never seen this type of income either.
Nonresident-Aliens for US Tax Purposes
Stipends reported to you on a Form 1042-S with income code 16 in box 1 are taxable scholarships. Per IRS Publication 519, gross income from box 1 should be reported on Form 1040-NR line 1b. Federal tax withheld from box 7 should be reported on Form 1040-NR line 25G.
How do I request a duplicate W-2?
To request a duplicate W-2, please follow the instruction on the Student Employment Website.
How do I request a duplicate 1042-S?
To request a duplicate 1042-S, please follow the instruction on the Student Employment Website.
I have a tax question. Whom can I ask?
In preparing a personal income tax return, fellowship recipients should consult with a professional tax preparer or advisor. Boston University staff are not permitted or qualified to provide tax advice. Recipients may, however, find it helpful to read the IRS publication relevant to their personal situation:
- IRS Pub 970, Tax Benefits for Education
- IRS Pub 519, U.S. Tax Guide for Aliens
- Federal income tax forms and publications can be downloaded from the IRS website
- Massachusetts income tax forms and publications can be downloaded from the Massachusetts Department of Revenue (DOR) website
- IRS Guidance: Withholding Federal Income Tax on Scholarships, Fellowships, and Grants Paid to Aliens
- Free tax help:
- Federal: Internal Revenue Service 1-800-829-1040
- State: Massachusetts Department of Revenue 1-800-392-6089; to request an in-person or virtual appointment, call 617-887-6367