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Reporting and Taxation of Fellowship Stipends to by HC120911154019

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									                 Reporting and Taxation of Scholarships and Fellowships to
           Students and Nonstudents, including U.S. Citizens and Foreign Nationals



Policy

This policy and its corresponding procedures define institutional responsibilities and
departmental guidelines relating to reporting and withholding requirements of
scholarships, research fellowships, and other payments to students and nonstudents
(including U.S. citizens and foreign nationals) of the University of Oklahoma
(University). Scholarship and fellowship reporting and taxability are governed by the
Internal Revenue Code and Treasury Regulations.

This policy and corresponding procedures are intended to assist departments in
determining whether their scholarship/fellowship payments to students and nonstudents
are truly a scholarship/fellowship or compensation for services rendered, as defined by
the Internal Revenue Code and Treasury Regulations. This policy and procedure also
outlines how their scholarship and fellowship payments to students and nonstudents
should be processed.

Definitions

Compensation: Cash or noncash payments for services rendered. A payment need not
be labeled as compensation to be considered compensation.

Employee: Any individual who, under the common law rules applicable in determining
the employer-employee relationship, has the status of an employee.

Employment: Any service, of whatever nature, performed by an employee for the
person employing him, irrespective of citizenship or residency of such employee.

Scholarship/Fellowship: To be considered a scholarship or fellowship, an amount does
not need to be formally designated as such. Generally, a scholarship is an amount paid
for the benefit of a student, to aid the student in the pursuit of study at an educational
institution. Generally, a fellowship is an amount paid for the benefit of an individual to
aid in the pursuit of study or research. Furthermore, a scholarship or fellowship payment
may be in the form of a reduction in the amount owed by the payee to an educational
organization for tuition, room and board, or other fees.




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                 Reporting and Taxation of Scholarships and Fellowships to
           Students and Nonstudents, including U.S. Citizens and Foreign Nationals


Procedures

The department providing the scholarship or fellowship grant must determine if the
payment is in fact a scholarship or fellowship grant or is actually compensation for
services. The department responsible should analyze the following criteria for each
payment to be awarded.

Pursuant to the Internal Revenue Code and Treasury Regulations, in order for a payment
to be considered a scholarship or fellowship, the grant must meet the following three
conditions:

           1) The individual’s research schedule should be independent of faculty
              supervision and control; and

           2) The individual must be allowed to choose and direct his/her own research
              work; and

           3) The University or department must NOT have the right to retain any results,
              patents or copyrights from the individual’s research.

If any of the above conditions are not satisfied, the payment (or at least a portion thereof)
is compensation for services rendered to the University and is not a scholarship or
fellowship grant. In such a case, the payment must be processed through the Office of
Human Resources, Payroll and Records, because the payee is considered an employee of
the University. In such a case, the Department should follow the established procedures
for adding an individual to the payroll system. See the section below for additional
procedures if the payee is a foreign national.

If all the above requirements are in fact satisfied, the payment is considered to be a
scholarship or fellowship grant (not compensation for services). The responsible
department must complete the University form Authorization for Scholarship and
Fellowship Payments, and submit it for approval, if required, before it is processed by
Financial Support Services. For scholarship/fellowship payments processed against grant
departments, the scholarship/fellowship must first be approved by the Grants and
Contracts Office, and then routed to Financial Support Services for processing. For
scholarships/fellowships processed against agency-special departments, the
scholarship/fellowship may be submitted directly to Financial Support Services for
processing. Please note that scholarship/fellowship grants cannot be processed on
XX2XXXXXX departments.

See the section below for additional procedures if the payee is a foreign national.




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                 Reporting and Taxation of Scholarships and Fellowships to
           Students and Nonstudents, including U.S. Citizens and Foreign Nationals




Additional Procedures for Scholarship or Fellowship Payments Awarded to Foreign
Nationals

Once the department makes the determination noted above (e.g., payment is a
scholarship/fellowship grant or payment is compensation for services), there are
additional procedures required if such payee is a foreign national.

The foreign national payee must complete a Foreign National Information Form (FNF)
and submit it to the International Tax Specialist (Specialist) in the Office of Human
Resources, Payroll and Records. The FNF can be picked up in the Payroll and Records
office or can be downloaded from the Office of Human Resources website. Based on the
information provided on the FNF, the Specialist will then determine the U.S. tax
residency, work authorization status, and whether the foreign national payee is eligible
for tax treaty benefits. If the payee is eligible to claim a tax treaty benefit, the Specialist
will complete the tax treaty forms based on the FNF and contact the payee to come by the
Payroll and Records Office to sign the applicable tax treaty form. The Specialist will also
confirm that the foreign national payee has either a Social Security Number or an IRS
Individual Tax Identification Number (ITIN), which is required in order to claim a tax
treaty benefit.

If the foreign national payee is considered to be an employee based on the analysis
outlined above and all additional forms have been completed, the Payroll and Records
office will add the foreign national payee to the payroll system.

If the foreign national payee is receiving an actual scholarship or fellowship grant based
on the analysis outlined above and all additional forms have been completed, the
Specialist will then communicate and forward the additional forms to Financial Support
Services (FSS) to process the scholarship or fellowship grant.

It should be noted that scholarship and fellowship grants awarded to foreign recipients
that are to be reimbursed by the University of Oklahoma Foundation must be processed
through the Financial Aid office.




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