When inquiring about the University’s tax withholding or reporting obligations on payments to individuals, please keep in mind that the term stipend does not sufficiently define the nature of a payment to allow for a determination to be made. Nature of payment must be identified as scholarship/fellowship, compensation, or expense reimbursement.
Scholarship/Fellowship
Scholarship and fellowship payments are distinguished by the following:
- There is no expectation of services past, present, or future from the recipient in exchange for the payment from the University.
- The primary beneficiary of the payment is the recipient in that their educational goals and pursuits are being supported.
Visit our Scholarships and Fellowships page for further definitions, information on qualified and non-qualified expenses, and general guidance on the University’s tax withholding and reporting obligations on this nature of payment.
Compensation
Compensatory payments are distinguished by the following:
- Services have been, are being, or will be provided by the recipient in exchange for the payment from the University.
Visit our Compensation page for further definitions, information on compensation classifications, and general guidance on the University’s tax withholding and reporting obligations on this nature of payment.
Compensatory vs Scholarship Payments
Use our Compensatory vs Scholarship Payment Flowchart for a quick reference guide on what is a compensatory payment and what is a scholarship/fellowship payment. In addition, the chart below will provide scenarios to demonstrate the difference between these two types of payment.
| COMPENSATORY | SCHOLARSHIP/FELLOWSHIP |
|---|---|
| A faculty member is working on a project and pays a student to assist with the research. The student’s participation is not a degree requirement. If the student was not assisting with the research, the faculty member would have to hire someone else to do the work or do it themselves. | A student receives financial support to do research solely for their thesis for their degree. The research is not for, nor does it provide a benefit to the University. |
| A student is paid to organize a conference including arranging seating and designing flyers and other marketing for the department. | A student is paid to participate in a conference directly related to their graduate studies and career networking. No work is performed. |
| A student is paid by a department for providing research assistance. There is no program designed to train students as part of their degree requirements. The student is providing a needed service. | As part of a degree program, a student is paid to participate in a summer program where they will focus on learning research techniques. The student will not be providing any services but is in a learning role. |
| A department is expanding a writing tutoring lab; the tutors are current students. Flexible schedules are available with a minimum number of hours per week. The tutors (students) are providing services to the department. | A student committee of volunteers is organized to share common educational challenges, interests, and help each other achieve their educational and career goals. The members of the committee receive financial support for their participation. Students are not providing services. |
Expenses
The University reimburses allowable expenses to students, employees, independent contractors and other individuals, and/or may pay third parties for allowable expenses on behalf of such individuals. Depending on the details, these payments may represent University business expenses, compensation, or scholarship/fellowship. The University’s tax withholding and reporting obligations for allowable expense reimbursement payments vary based on the following circumstances:
- Expense reimbursement associated with services provided by the individual meeting the Accountable Plan rules.
- Expense reimbursement associated with services provided by the individual not meeting the Accountable Plan rules.
- Expense reimbursement not associated with services provided by the individual.
Visit our Expenses page for further definitions and information regarding the University’s tax withholding and reporting obligations for each type of this nature of payment.
Please contact Tax Services for information about University-related tax issues. University employees, while in their official role at the University, are not allowed to act as tax consultants or provide personal tax advice. Use of this site does not constitute advisement. For personal tax questions, individuals should consult with a professional tax advisor.