Student Payments and Taxes

Payments From Payroll Services (Compensation)

Payments to students for services are considered compensation and are paid by UNC-CH Payroll Services. These payments typically have FICA (Social Security and Medicare) taxes withheld. These payments will have applicable Federal and state taxes withheld based upon the individual’s tax forms (i.e., W-4 and NC-4) and the defined tax withholding tables.

To receive the FICA exemption, students must be enrolled at least half-time in coursework during the compensated pay period. In a practical sense, this means graduate students must be registered as follows:

Payments Outside Payroll Services (Non-compensation)

Payments disbursed outside of Payroll Services typically will not have taxes withheld. In those cases, individuals should consult IRS and state guidance on if and when estimated tax payments might need to be made. Tax liability is based on many factors for each individual and the University cannot speak definitively on how this will affect each student. However, student payments applied to student expenses tend to receive a more favorable tax treatment than 1099 MISC or W-2 compensation.

Payments disbursed through GradStar are considered non-service in nature and are defined as financial aid. Taxes are not withheld from payments processed through GradStar. Financial aid is reported on form 1098-T, which is an informational tax document to aid taxpayers in determining whether they are eligible to claim a tax deduction or an education tax credit on their income tax return. More information can be found on the Cashier’s Office website.

Student payments processed by Accounts Payable campus vouchers are typically reimbursements and are not reported as compensation.

Tax Advice

Current university employees, due to the credentials required to provide tax consultation, are unable to provide tax advice or consulting. However, we can provide suggested resources outside the university to assist students with filing taxes: