The school is doing this NOT to follow the IRS rules, but to make it easy for the FAFSA reporting. The tax manager is wrong, whether you are a student or not, you are an employee of the college when it comes to the RA position. I bet that their insurance policies even have you classed as that! If you got hurt in your RA capacity, Workman's Comp (or the school) would be paying your medical
bills. For legal and employment purposes, the RA job IS a job, and therefore the room and board are NOT income to you.
I am guessing that they are doing this for simplicity. They probably issue thousands of award letters for either free and/or reduced room and board. However, there are probably only a handful who get RA positions, so rather than try to figure out which ones get which treatment, and pay some expensive software
programming fees, they just leave it at what the majority of the students are and let the handful such as yourself argue otherwise.
As far as the RA position, I think that this proves the employee relationship. The IRS has a series of standards on what is an employee and what is an independent contractor
. These outlines for the RA position show that you are clearly an employee. Therefore, if you are an employee, living in the employer-owned living quarters, and are required to do your job during the employer's hours (basically around the clock, from what the descriptions say) and the employer limits your outside activities (you can only work 100 hours per semester outside of the dorm) you are living there for the convenience of the employer, and under Internal Revenue Code §119(b), the value of this room and board is NOT taxable income to you.
So, if you take the $15,808, and deduct the value of the housing that the school has included in the number, your amount will be LESS than or EQUAL TO the Box 1 amount, so there will be NO taxable income to you.
It does not matter how the college procedure works. What matters is that the IRS would consider you an employee, and as such, your room and board are not taxable.
There...still no change in the answer!