Is My Fellowship Stipend Taxable and What Tax Forms Will I Receive?
Because you are on a fellowship you will not receive a W2 form as fellowship stipends are not generally wages/salary. The stipend may, however, be taxable by the IRS.
Because there are legal consequences of giving tax information (i.e. that someone can be sued for giving incorrect advice) you will find that the university makes guarded statements about the tax situation for fellowship stipends.
You are in the same situation as people on NSF fellowships and if you google “NSF fellowship” and “tax” you will find some information. (Much of it, unfortunately, is less than clear.) The FAQ on the NSF GRF has a number of guarded statements concerning taxation of fellowship stipends: http://www.nsf.gov/pubs/2011/nsf11050/nsf11050.jsp#a155
Question number 8 on this FAQ from NC State’s HR Department gives, I think, the clearest statement on the tax situation:
- I am a US citizen and received a scholarship / fellowship this year. Why didn’t I receive a W-2 Form?Qualified scholarships and fellowships are non-taxable if (1) you are a candidate for a degree at an educational institution, (2) the amount received is used for tuition and fees required for enrollment or attendance at the educational institution, for books, supplies and equipment required for courses of instruction and (3) the amounts received are not payment for your services.
Generally, the entire amount received is taxable if you are not a candidate for a degree.
Even though you did not receive a W-2 Form, all or part of the proceeds received in your scholarship/fellowship may be taxable. You should review IRS Publication 970 “Tax Benefits for Education” at www.irs.gov to determine which expenses are taxable and which are nontaxable. Taxable expenses such as room and board and other personal expenses, will need to be reported on your income tax return (1040,1040A, etc.) as taxable income. You will need to review the instructions for the tax return form used. You may also wish to make quarterly payments to the IRS for the taxable portion of your fellowship. For more information on scholarships and fellowships, see IRS Publication 970 “Tax Benefits for Education.”