FELLOWSHIP TAX FELLOWSHIP TAX INFORMATIONINFORMATION

Tax-Free FellowshipsTax-Free Fellowships

US Persons- Fellowships are tax free US Persons- Fellowships are tax free only if:only if:

1.1. You are a candidate for a degree at You are a candidate for a degree at an eligible educational institution, an eligible educational institution, andand

2.2. You use the fellowship to pay You use the fellowship to pay qualified education expenses.qualified education expenses.

Nonresident aliens – Taxable at 14% Nonresident aliens – Taxable at 14% unless from a Tax Treaty country.unless from a Tax Treaty country.

Qualified Education ExpensesQualified Education Expenses

Expenses for US Persons:Expenses for US Persons: Tuition and fees required to enroll at Tuition and fees required to enroll at

or attend the eligible institution, andor attend the eligible institution, and Course-related expenses, such as Course-related expenses, such as

fees, books, supplies, and equipment fees, books, supplies, and equipment that are required for all students in that are required for all students in your course of study.your course of study.

Non-qualifying Non-qualifying Expenses-US PersonsExpenses-US Persons

Expenses that do not qualify:Expenses that do not qualify: Room and board,Room and board, Travel,Travel, Research,Research, Clerical help, orClerical help, or Equipment or other expenses not Equipment or other expenses not

required for enrollment.required for enrollment.

Fellowship Chart-US PersonsFellowship Chart-US Persons

Fellowship Worksheet-USFellowship Worksheet-US

Example 1Example 1

You received a fellowship of $10,000. You received a fellowship of $10,000. You are not a candidate for a You are not a candidate for a degree. The $10,000 you received is degree. The $10,000 you received is taxable.taxable.

Example 2Example 2

You receive a fellowship for $10,000 You receive a fellowship for $10,000 and a $2,000 scholarship required to and a $2,000 scholarship required to be used for room and board. You are be used for room and board. You are a candidate for a degree at an a candidate for a degree at an eligible educational institution. eligible educational institution. Tuition, books, and other required Tuition, books, and other required fees total $8,000. fees total $8,000.

Example 2 – contExample 2 – cont

1. Total Scholarship/Fellowship:1. Total Scholarship/Fellowship: $12,000$12,000

2. Amt. paid for teaching, etc.:2. Amt. paid for teaching, etc.: $0$0

3. Subtract line 2 from 13. Subtract line 2 from 1 $12,000$12,000

4. Amt. 4. Amt. requiredrequired for non-qualified exp.: for non-qualified exp.: $2,000$2,000

5. Subtract 4 from 35. Subtract 4 from 3 $10,000$10,000

6. Amount used for qualified ed. exp:6. Amount used for qualified ed. exp: $8,000$8,000

7. Subtract 6 from 57. Subtract 6 from 5 $2,000$2,000

8. 8. Taxable Part:Taxable Part: Add 2,4, and 7. Add 2,4, and 7. $4,000$4,000______________ _______ ________________ _______ __

Reporting RequirementsReporting Requirements

For US persons, it is the taxpayer’s For US persons, it is the taxpayer’s responsibility to report taxable responsibility to report taxable fellowships.fellowships.– Fellowship statement Fellowship statement

For Nonresident Aliens, it is the For Nonresident Aliens, it is the responsibility of Purdue to report responsibility of Purdue to report taxable and nontaxable amounts of taxable and nontaxable amounts of fellowships.fellowships.– 1042S that you print from Glacier1042S that you print from Glacier

Example of Fellowship StatementExample of Fellowship Statement

To: Purdue PeteTo: Purdue Pete SS #: 111-11-1111SS #: 111-11-1111 Department:Department: Aero and Astro EngineeringAero and Astro Engineering

From:From: Tax DepartmentTax Department

Subject:Subject: FELLOWSHIP PAYMENTSFELLOWSHIP PAYMENTS

For your information, you were paid a total of For your information, you were paid a total of $1,869.00 as a fellowship by Purdue University $1,869.00 as a fellowship by Purdue University during calendar year 2007. This amount has not during calendar year 2007. This amount has not been reported on Form W-2, Wage and Tax been reported on Form W-2, Wage and Tax Statement.Statement.

Federal Estimated Tax PaymentsFederal Estimated Tax Payments

US persons - Required if owe $1,000 in US persons - Required if owe $1,000 in taxes and the amount you have taxes and the amount you have withheld is less than the smaller of:withheld is less than the smaller of:

1.1. 90% of taxes shown on your 2007 tax 90% of taxes shown on your 2007 tax return, orreturn, or

2.2. The tax shown on your 2006 return.The tax shown on your 2006 return. Use IRS form 1040-ES to determine 2007 Use IRS form 1040-ES to determine 2007

tax liabilitytax liability

Federal Estimated Tax Payments – Federal Estimated Tax Payments – cont.cont.

Nonresident Aliens – Purdue will Nonresident Aliens – Purdue will withhold taxes from fellowship, if withhold taxes from fellowship, if required, at the rate of 14%required, at the rate of 14%

The actual amount of taxed owed on The actual amount of taxed owed on the fellowship may differ from the the fellowship may differ from the 14% and will be determined based 14% and will be determined based on all income reported on the on all income reported on the 1040NR Federal Tax Return1040NR Federal Tax Return

State and County TaxState and County Tax

State and County Taxes apply to the State and County Taxes apply to the taxable amount of any fellowshiptaxable amount of any fellowship

For information on making estimated For information on making estimated payments, refer to the Indiana payments, refer to the Indiana Department of Revenue website:Department of Revenue website:http://www.in.gov/dor/individual/estimated.htmlhttp://www.in.gov/dor/individual/estimated.html

Glacier for Non-Resident AliensGlacier for Non-Resident Aliens

Your Business Office will set-up a Your Business Office will set-up a Glacier account for you.Glacier account for you.

You will receive an email from You will receive an email from support@online-tax.net with your support@online-tax.net with your login instructions.login instructions.

Log into Glacier and key in your Log into Glacier and key in your immigration information and details immigration information and details of prior visits to the US.of prior visits to the US.

Glacier – cont.Glacier – cont.

Glacier will determine the taxability of Glacier will determine the taxability of your fellowship.your fellowship.

Print out from Glacier your: Print out from Glacier your: – Tax Summary ReportTax Summary Report– Required IRS tax formsRequired IRS tax forms

Mail or deliver above forms and Mail or deliver above forms and copies of required immigration copies of required immigration documents to Trent Watkins in documents to Trent Watkins in Freehafer Hall.Freehafer Hall.

Helpful WebsitesHelpful Websites

Publication 970 - Publication 970 - http://www.irs.gov/publications/p970/index.html

Form 1040-ES – Estimated Tax Form 1040-ES – Estimated Tax Payment Instructions – Payment Instructions – http://www.irs.gov/pub/irs-pdf/f1040es.pdf

IRS Website’s Frequently Asked IRS Website’s Frequently Asked Questions – Questions – http://www.irs.gov/faqs/faq9-3.html

Contact InformationContact Information

Lauren LacyLauren Lacy

(765) 494-1697(765) 494-1697

lemaxwell@purdue.edulemaxwell@purdue.edu