If you’re a graduate scholar who receives non-service fellowship payments from the University to support you in the course of your studies or research, you will need to know how those payments affect your taxes. The information below applies to non-service fellowship payments in classes 9560, 9561, 9562, 9564, 9565, 9566, 9567, 9568, 9569, 9582, 9583, and 9584.
Tax Treatment
The Internal Revenue Service (IRS) considers "non-qualified" fellowship amounts to be taxable income, which you are responsible for reporting on your tax return. Neither the University nor the grantor of your fellowship are required to file information about your grant (such as a W-2 or 1099-M) with the IRS.
For more information about income taxes on non-qualified fellowships, see IRS Publication 970, Tax Benefits for Education.
Paying Federal and State Taxes
While the University can’t provide help or advice on personal tax matters, non-service fellowship recipients have the option of filing estimated taxes with the IRS and the Minnesota Department of Revenue. The amount of your estimated payments, if any, will depend on your personal income tax situation.
If you are also employed by the University, with paid salary through that other job, you can avoid filing estimated taxes by having more taxes withheld from your wages. You can do that by submitting a W-4 through the My Pay tab in MyU. You can also have more Minnesota taxes withheld by filing a Form W-4MN.
The IRS Estimated Taxes site has information on how to figure your estimated tax payment. You can use the worksheet in Form 1040-ES to calculate your payments. The worksheet will also help you make Minnesota estimated payments.
How to File Federal Estimated Income Tax Withholding
The IRS has information and help on its Estimated Taxes website. The information includes such things as how to pay estimated taxes, how to figure your estimated tax, and when to pay estimated taxes. You can pay online by any of these methods:
- IRS Direct Pay: This is a free, secure payment directly from your checking or savings account. You don’t need to register or enroll to make payments.
- EFTPS (Electronic Federal Tax Payment System): This is a free, secure, and convenient method of paying taxes. It does require enrollment.
- Pay by Card: This safe, secure method of paying estimated taxes is through a service provider. The provider charges processing fees, but no part of the fee goes to the IRS.
Timing
For information on when to pay estimated tax, see the IRS’s Estimated Taxes website or IRS Publication 505. Publication 505 also has tax tables and worksheets to help you determine if you should pay estimated tax and how much you should pay.
How to File Minnesota Estimated Income Tax Withholding
The Minnesota Department of Revenue has information and help on its Estimated Taxes website. The information includes such things as how to pay estimated taxes, how to figure estimated tax, and when to pay estimated taxes. You can pay estimated taxes online by:
- E-Services Payment System
- debit or credit card
- Check
Year-End Reporting Requirements
What's Reported by the University of Minnesota
The University of Minnesota will not report your fellowship to the IRS. See IRS Publication 970 (pdf) for more information.
Determining Total Fellowship Amount
The total taxable fellowship amount you have been paid in the calendar year can be found on your final pay statement of the year. See Fellowship/Scholarship YTD Earnings in the Hours and Earnings section of your pay statement. You can view and print your pay statement by going to the My Pay tab in MyU and clicking View/Print All Pay Stmts near the bottom of the page. Your department can also provide you with information about any other taxable payments made on your behalf—for example, the value of any health insurance paid by the department on your behalf as a fellow.
Form W-2 Reporting If More Than One Appointment Is Held During the Year
If you also held another appointment for services as an employee during the calendar year, such as an assistantship, your Form W-2 will reflect all the taxable wages and any taxes withheld from your service-related employment appointment. Your fellowship payment will not be reported on either the Form W-2 or Form 1099-M.
How to Report Taxable Fellowships to IRS at Year End
For information on taxes for non-qualified fellowships, and how to report them on your tax return, see IRS Publication 970 (pdf), Tax Benefits for Education.
Other Payments
Non-employees are not eligible for payroll deductions such as an optional retirement plan, parking fees or Metro Pass, recreation center memberships, the Community Fund Drive, and other deductions.
For More Information
Email or call the Office of Human Resources Contact Center at ohr@umn.edu, 612-624-8647, or 800-756-2363.