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:
- Spring: 3 credits for thesis/dissertation or 4.5 credits otherwise for January-May payrolls
- Summer I: 2 credits for June payroll
- Summer II: 2 credits for July payroll
- Fall: 3 credits for thesis/dissertation or 4.5 credits otherwise for August-December payrolls
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.
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:
- The UNC School of Law hosts a Volunteer Income Tax Assistance (VITA) program to help with taxes.
- The Internal Revenue Service (IRS) Topic No. 421 provides the policy about taxability of scholarships, fellowship grants, and other grants.
- The Internal Revenue Service (IRS) publication 970 provides the policy for tax benefits for education.
- The University Cashier has detailed information on forms issued by their office, such as form 1098-T.
- The UNC Payroll Services has information on payroll taxes and forms, such as W-2, W-4, and NC-4.