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I received a stipend from a federal agency. Thus, I have no

federal taxes withheld, but I...
I received a stipend from a federal agency. Thus, I have no federal taxes withheld, but I still have to pay federal taxes. Do I need another form besides a W-2 to make sure I make a correct payment?
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Answered in 13 minutes by:
7/18/2013
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 779
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Welcome to Just Answer! I would be happy to answer your question for you!

Stipends are usually given to people as assistance or encouragement to attend a university or college, usually for an advanced or graduate degree, such as a Masters or PhD. They are meant to cover tuition, books, fees, and living expenses. Is that what this stipend is?

Stipends that are used to pay for tuition, books, and school fees are called excludable stipends, and are not taxable. Stipends that are used for other purposes, such as living expenses, are subject to income tax. However, they are NOT subject to FICA or Self-Employment expenses.

I hope this answers your question! If you found it helpful, please rate me positively! I would appreciate it! Thanks!

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Customer reply replied 4 years ago


I don't think you understand my question. I am not asking what is a stipend, I am asking how to pay my taxes on them. I.e. do I just use my w-2 form or do I need other information?

I thought I understood the question, I don't think I was clear enough with my answer.

 

The stipend may not be taxable at all! Just because you received (or may receive) a W-2 does not automatically mean it is taxable. Most universities do not assume or even ask how the stipend is spent, so they by default issue a Form W-2 and leave it up to the student to determine if it is taxable or not. I always look for ways to make income not taxable in the first place. Why pay tax when you don't have to?

If the stipend is taxable, you will receive a Form W-2 showing the amount of taxable income, with no Federal, FICA or Medicare withholding. Sometimes they withhold state taxes.

Assuming that it is taxable, the W-2 you receive is reported on Line 7 of your Federal Form 1040, along with any other wage income you receive. It is treated as ordinary income and taxed at your regular rates.

If there has been no withholding, you may owe some tax. Depending on your other sources of income, if the balance due exceeds $1,000, and your withholding is not as great or greater than your 2012 tax bill (or 2011 tax bill if the stipend was received in 2012), you may have an underpayment of estimated tax penalty. To avoid this, you can make estimated payments to the IRS using Forms 1040-ES. These are available at www.irs.gov where you can print the forms.

I hope I have been more clear with this reply. If not, please feel free to let me know. Also, don't forget to rate me if this was helpful.

taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 779
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
Verified
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Customer reply replied 4 years ago


You are definitely getting much more helpful. However, I am not entirely clear. Let me be more specific:


From July 2012-July 2013 I received a stipend of $45000 from the federal government as a research fellow (and for academic purposes of getting a doctoral degree). The w2 form doesn't have much of anything. Do I just file a return based on this and that's it? Or do I need to use Form 1040-ES? The year before I did not have a stipend from a federal source just the university scholarship.


After this is clear, I will be sure to rate you as excellent!

You should have received a Form W-2 for the amount of stipend you received from 7/1/2012 to 12/31/2012. The W-2 will probably have numbers only in Box 1, and perhaps Box 16 for State wages. That should be it.

You report the amount from the Form W-2 on Line 7 of the Form 1040. You go through the Form, and in the end, calculate your tax. If you had any tax liability at all in 2011 (did you? Look at Line 61 of last year's tax return) you may have a penalty if you owe more than $1,000.

Depending on what your total tax is for 2012, you MAY have to file Forms 1040-ES for 2013. Again, if I know what your other income is for 2012 and what you expect it to be for 2013, I can help you with this.

I look forward to your response.

It would be helpful to know what your other income was, if any, for 2012 and 2013.
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Customer reply replied 4 years ago


What is Form 1040?


Anyway: 2011 I was a PhD student receiving a stipend from the university of $25,000 (I still have to file the return for this anyway)


 


2012: I was receiving a stipend of $45,000 from the federal grant. Did not file a return yet, and am working on this now. I accidentally filed it with a wrong W-2 (the 2011) one. By the way, is it necessary I file an amendment or is it okay to just wait and see what the IRS says?


 


2013: I have been making a stipend of $45000 until now, where I am in between jobs. Tax season for this is still not until next year right? I don't even have a w-2 form for 2013 yet on the POSC website.


 


Confused yet?

Did you use any of the stipend to pay for tuition, books or fees for any of the years?

As far as the incorrect return, you should file an amended return. If you amend, the IRS may not assess any penalties. If the IRS catches you, they automatically assess penalties and you have to fight to get them removed.

The 2013 return will be due next April 15. You have until then to worry.

Are you single? Married? Any kids? I have to ask, as it affects the amount of tax you pay. I myself am looking at getting a PhD in Accounting, and one of the universities I am looking at will give me a full ride scholarship, plus a stipend to live. There is a small teaching requirement with the stipend. The stipend would be taxable, but since I am married (newlywed actually, May 25) with kids (two kids, three step kids) the tax hit won't be too bad. Knowing your situation will help.

Thanks! I look forward to your reply!

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Customer reply replied 4 years ago


I did not use any of the stipend to pay for fees, tuition, books, since I also received money for tuition as well as money for books (up to $1000). Of course I am talking about the federal grant not the University grant which required paying out of pocket for books and some fees.

 

FreeTaxUSA whom I filed with has this to say:

"Do I need to amend my tax return?
We recommend that you do not amend your tax return until after you have received your refund or paid the taxes you owe from your original return you filed. The IRS will often automatically make a correction to your tax return for missing or incorrect W-2 (W2) or 1099 forms. You do not need to amend your federal tax return if the IRS corrects the error on your tax return when they process your original tax return. You will receive an IRS notice explaining the adjustment or asking for additional forms for documentation.
Common reasons for needing to file an amended return are:

  • You chose the wrong filing status
  • You didn't claim a dependent or incorrectly claimed a dependent
  • You received another W-2 (W2) or 1099(and the IRS did not automatically adjust your tax return when they processed your return)
  • You need to change the deductions or credits on your tax return"

 

Based on that, do you still have the same opinion? I hope not since I would rather not have to go through this hassle, but your honest opinion is appreciated.

 

I am married with two young kids.

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taxmanrog
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 779
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Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.

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