Overview of Fellowships, Scholarships, and Trainee Program Payments
The Internal Revenue Service (IRS) Publication 970: Tax Benefits for Education covers the rules for the taxation of student scholarships and fellowships. The publication states that the part of any grant, scholarship, or fellowship that represents payment for teaching, research or any other service is taxable to the student. Colleges and universities are obligated to withhold taxes on any award that represents compensation for services. Nonresident alien students may have taxes withheld on awards that do not represent compensation for services. Their tax obligations are governed by their visa status, United States (US) tax laws, and/or the tax treaty between the US and their country of residence.
The Institute is required by federal law to withhold taxes on fellowships that require the student to perform services (past, present or future) to receive the award. Students that are required to perform a service as part of the fellowship agreement, must be classified as employees and payments are processed through the OHR/Payroll process. The consequences of not properly withholding the taxes may cause the Institute to incur serious financial penalties. The department is responsible for determining if a student’s fellowship/trainee award requires that a service be performed. The Office of Human Resources can assist departments that need clarification regarding proper employee classification.
All payments to students for research training grants, participant support, and scholarship/fellowships must be approved by Accounting Services Financial Aid Team prior to payment. The Vendor Profile Form must accompany the payment request. Once approved, the payment request and related documentation will be forwarded to Accounts Payable or Financial Aid for payment processing. For more information regarding graduate fellowships, refer to Accounting procedure Processing Fellowship Payments. Procedures related to undergraduate scholarships and fellowships can be found in Accounting procedure Processing Undergraduate Training Program Grants.
Overview of Stipends for Participant Support
GT Students: Stipends for Georgia Tech students are processed through Student Financial Planning and payments are posted to the student’s account through the Banner system.
Employees: Stipends awarded to employees are processed through Payroll.
Stipends to non-Georgia Tech students who are also not employed by Georgia Tech are processed through Accounts Payable via the Check Request Form. A Vendor Profile Form (or W-8BEN for foreign students) is required for all participant support stipend payments made through Accounts Payable. These payments are reported to the IRS on Form 1099-misc annually (or 1042S for foreign students).