MSTPers w/ stipends: r u paying TAXES?

[chef]

My friend who's a MSTP told me that even though our stipends come from Uncle Sam, we don't get W2 forms for some reason.

Are we supposed to pay taxes? If YES, are there any exemptions, special tax breaks for us?

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[none]

This is QUITE a complex issue. Even the MSTP administration doesn't seem absolutely sure. The general consensus, though, is that you do need to report the stipend as income even though the school doesn't because you aren't an employee until you enter into the graduate phase.

 

[BME02]

I talked with the admin at Wash U about this and they said that they can't do any of the withholding for you because the money is federal. You do need to tax yourself and it is a good idea to tell them to withhold a certain amount everymonth so you don't get nailed for not paying quarterly. That is what I have gleened from talking with other people. This is not my area of expertise. I did hear about a problem somewhere where the a bunch of students at one school were not reporting their stipends and they all got audited.

 

[shamus1]

•••quote:•••Originally posted by BME02:
•I did hear about a problem somewhere where the a bunch of students at one school were not reporting their stipends and they all got audited.•••••Yeah, I heard that low- and moderate-income people are 30 times more likely to be audited than those in the top income brackets. An article in the New York Times recently said that if the IRS nailed all the high-income tax cheats, they would be able to eliminate the income taxes for anyone earning less than $40k. So, you need to keep your nose clean while you are a student, then you can ream the system once you make big bucks as a doctor. Pretty cool, eh?

I can imagine that the quarterly payments are a pain; I cannot save money from one paycheck to the next, much less for 3 months. One good thing about receiving a stipend is that you do not have to pay the social security tax, like other working stiffs. That amounts to 7.65% of your wages, so it is not insignificant. Also, you can deduct the cost of books and equipment that you are required to buy for your classes; this comes right off the top and is not included as part of the standard deduction. Some MSTP students have told me that they did not have to pay any taxes for the first year (which really only amounted to 5 months, August-December) because the personal exemption, standard deduction and book/equipment costs lowered their income below the threshold that would incur taxes.

 

[MacGyver]

Well, its logical that low and mod income people would be more likely to get audited because there are LOTS more of them than there are rich people.

The auditing process has to have some level of randomness to it, because if it didnt then they would get sued for discriminatory practices.

 

[Hallm_7]

That's true MacGyver, but the New York Times would never report something like that. It would point out how ignorant their socialist leaning ideas are.

 

[Neuronix]

If it's 30 times more likely, I would assume that would mean that the odds of the average person of that class would have 30 times higher odds of being selected for an audit. That wouldn't mean that 30 times more middle and low income people are audited, because, yes that would make sense.

Actually even then, I heard a long time ago that the ratio of lower:middle:upper classes in this country is somewhere between 1:8:1 and 1:16:1. But then again what the government considers lower, middle, and upper class by income lines is very different from what most people think of them as. So my point is that even if 30 times more middle income people are audited, there aren't even 30 times more middle income people than upper income people.

I give up. I don't want to turn this into a debate on taxes. I just thought that it does point to something else going on in the system. The IRS does have a ridiculous amount of power (as shown at least partially by the Nixon era), and I think that it should be abolished and that taxes should be voluntary (yes I'm libertarian). You'll probably find that ridiculous, I've heard it before. Like I said, I don't wanna turn this into a tax debate.