Tax Information

The University of California does not provide tax advice; you should contact your personal tax adviser with any questions or concerns. This website is intended only to introduce you to the tax rules applicable to recipients of fellowships and scholarships.



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WHO MUST FILE

• Federal Income Tax Return: All students must file
• State Tax Return: All students must file. If you reside or have worked in another state during the calendar year you may have to file in those states also.

WHEN TO FILE

While most individuals file tax returns annually on April 15, students may be required to pay estimated taxes quarterly (April 15, June 16, September 15, and January 15). For more information on rules pertaining to estimated tax payments, see IRS Publication 505, “Tax Withholding and Estimated Taxes."

TAXABLE INCOME

The general rule is that any income is subject to federal taxation. This includes income (stipend or salary) from scholarships and fellowships including UC awards, non-UC awards, awards processed by UCSF Student Accounting stipend desk, award payments made directly to students by non-UC sources, as well as awards that pay fees and tuition by crediting the student’s account.

It is the student’s responsibility to retain records of all scholarship and fellowship funds received each calendar year. This means you must keep copies of all award notices and announcements, as well as records of payments received from these awards (W-2, bank statements, notifications of fund transfers, UCSF Student Portal, and the Registrar’s website). You must have receipts for items you wish to deduct.

Certain qualified educational expenses may be excluded from taxable gross income. Qualified scholarships and fellowships include the following:
• Tuition and fees required for enrollment or attendance at the educational institution
• Fees, books, supplies, or equipment required for courses of instruction at an educational institution. The items must be required of all students in your course of instruction to be eligible.

However, in order for these to be qualified educational expenses, the terms of the scholarship and fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. You cannot include the following: room and board, travel costs, research costs, clerical help, equipment and other expenses that are not required for enrollment or attendance at an eligible educational institution.

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TAX WITHHOLDINGS FROM STIPEND PAYMENTS

US Citizens and Permanent Residents: UCSF does not withhold federal or state taxes from non-payroll stipend payments. IRS regulations prohibit the University from withholding income taxes on the taxable portion of scholarship or fellowship payments. UCSF does not issue IRS Forms 1099 or W-2 for non-payroll stipend payments. Students may refer to Form 1098-T (described below), but personal records serve as the official documentation for tax filing purposes.

Students who receive stipend payments may want to view a PowerPoint presentation from a tax workshop held at UCSF in February 2017 entitled "Tax Issues Associated with Reporting Fellowships."

International Students (F-1 and J-1 Visa Holders): UCSF withholds federal taxes from stipend payments unless you are from a country that has a tax treaty with the US. UCSF withholds state taxes from stipend payments from all international students. The UCSF Accounting Office issues an IRS Form 1042-S at the end of the year, indicating total stipend income and taxes withheld.

TAX WITHHOLDINGS FROM PAYROLL APPOINTMENTS

UCSF withholds taxes from salary payments of graduate students with Graduate Student Researcher (GSR) or Teaching Assistant (TA) appointments. These monthly salary payments are made by the UCSF payroll system. All salary payments are subject to federal and state income tax withholding. However, the pay is exempt from Social Security, state Disability Insurance, and Medicare, as long as the student is registered at least half-time (6 units) and has a payroll appointment no more than 80%. Typically, graduate students are not registered in the summer. If the student has a payroll appointment through the time they are not registered, their pay will be subject to additional tax withholdings during those months. Note that some programs require their students to take 8 units in order to be exempt from the additional taxes withheld.

In lieu of Social Security tax withholdings, graduate students with academic payroll appointments, taking less than 6 units or holding a payroll appointment greater than 80%, contribute to the University of California Defined Contribution Plan (DCP) as Safe Harbor participants. State Assembly Bill 906 authorized UC to require UC employees (including students with academic payroll appointments) who are excluded from membership to the UC Retirement Plan, to participate in the DCP Safe Harbor Plan, in lieu of contributing to OASDI (Old Age Survivor Disability Insurance). The DCP mandatory contribution is approximately 7.5% of salary and automatically defaults to the UC Savings Fund. Graduate students with academic payroll appointments have the option of redirecting their contributions to other UC or Fidelity Funds. Scroll down for more information on retirement. The Medicare deduction will be calculated at 1.45%.

Graduate students with payroll appointments receive a W-2 (Tax and Wage Statement) from UCSF by January 31. This is used to report wages paid to students with payroll appointments and the taxes withheld from them. Relevant amounts on Form W-2 are reported by the Social Security Administration and to the Internal Revenue Service. Whether you signed up to receive an electronic W-2 at At Your Service Online (AYSO) or you opted in to receive a paper version in the mail, your Form W-2 is available on AYSO.

The W-2 does not report fee/tuition remission; students who have had their fees/tuition paid as a benefit of the student payroll appointment will also receive a 1098-T form reporting qualified tuition and related expenses (see below for details about the 1098-T).

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STUDENTS RECEIVING BOTH PAYROLL WAGES AND NON-PAYROLL STIPENDS

Some students receive financial support from a combination of payroll wages (salaries for GSR/TA appointments) and non-payroll stipends. Students will receive a W-2 summarizing their income and tax withholdings for the calendar year for their salaried appointment, as well as a 1098-T that reports both qualified tuition and related expenses (fees and tuitions) along with the amount of non-payroll stipend payments received for the calendar year.

RETIREMENT

Graduate students with payroll appointments are not eligible for participation in the University of California Retirement Plan (UCRP); however, they do contribute to the University of California Defined Contribution Plan (DCP) as “Safe Harbor” participants. (This means that while these students do pay into the DCP, they do not pay into Social Security.) The DCP mandatory contribution is approximately 7.5% of salary and automatically defaults to the UC Savings Fund. Graduate students with payroll appointments have the option of redirecting their contributions to other UC or Fidelity Funds.

When the payroll appointment ends, students may:
• Request a distribution to be paid directly to them
• Arrange for a direct rollover of their money to a traditional IRA or other employer plan that accepts rollovers
• Keep their money in the Plan if their balance is at least $2,000; or
• Receive retirement income from the Plan, if eligible.

Participants who no longer have a payroll appointment with UCSF and have a balance of less than $2,000 in the Plan cannot leave their money in the Plan. Account balances of $1,000 or less will automatically be distributed at the end of the quarter to participants who have not provided distribution directions. Balances greater than $1,000 but less than $2,000 will be rolled over into an IRA in the participant’s name unless the participant provides students maintain their address records to assure delivery of any distribution.

Distributions are generally taxed as ordinary income in the year they are issued and may be subject to early distribution penalties if they are taken before age 59 1⁄2.

To access DCP funds, enroll in the Retirement Savings Plans, or for more information about the tax treatment and potential penalties of Plan distributions, contact Fidelity Retirement Services online at netbenefits.fidelity.com or call the toll-free number: 1-866-682-7787. Fidelity Retirement Services representatives are available Monday through Friday, from 5 a.m. to 9 p.m. Pacific time.

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GRADUATE STUDENTS WHO PAY THEIR OWN FEES AND TUITION

Graduate students who do not have their fees and tuition paid by fellowships and/or scholarships, but rather, pay their fees and tuition from their own personal resources, may be able to claim a Lifetime Learning Credit or an education tax deduction for their qualified tuition and related expenses.

FORM 1098-T

The 1098-T reports total scholarship payments, fellowship payments, and qualified tuition and related expenses for the calendar year. While the 1098-T may be helpful in preparing tax returns, personal financial records as listed above are the official supporting documentation for all federal and state income tax returns.

Note that the 1098-T reports qualified tuition and related expenses, scholarships, fellowships, and grants administered by the University without regard for its possible taxability. The definition of a qualified tuition and related expenses in the 1098-T is different from the definition of qualified education expenses to determine tax-exempt income for fellowship and scholarship recipients. Please refer to IRS Publication 970, Tax Benefits for Education, for details regarding qualified educational expenses that may be excluded from taxable gross income.

In addition, the 1098-T does not include scholarships, fellowships, and grants paid to the students directly by non-University sources; however, students are responsible for reporting them on their income taxes.

The University is required to file Form 1098-T to the IRS on behalf of all students who are US citizens or permanent residents for whom it processes non-payroll stipends, fee offsets, and fee remissions. The University is also required to provide copies of the 1098-T to students. UCSF contracts the service of the Tax Credit Reporting Service (TCRS) to process 1098-T forms and answer questions. If you need another copy of your 1098-T, visit the TCRS website. If you have further questions, call 1-877-467-3821.

Non-resident alien individuals must request that the University file a 1098-T form on their behalf, as these students are not typically eligible to claim education credits or deductions.

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MORE INFORMATION

Internal Revenue Service: For the most current version of the IRS publications referenced, go to www.irs.gov.
• IRS Tax Topic 421 - Scholarship and Fellowship Grants
• IRS Publication 505 - Tax Withholding and Estimating Taxes (for details regarding paying estimated taxes on a quarterly basis)
• IRS Publication 519 - US Tax Guide for Aliens
• IRS Publication 970 – Tax Benefits for Education
• IRS Form 1040 ES - Estimated Tax for Individuals (for quarterly tax payments)
• IRS Form 1040 - US Individual Income Tax Return (for annual tax payments)

California Franchise Tax Board: For the most current version of California State tax documents, visit the California Franchise Tax Board website.
• 540 ES - Estimated Tax for Individuals (for quarterly tax payments)
• Form 540 - California Resident Income Tax Return

UCSF departmental and administrative staff may not advise individual students on these matters. Students may want to consult a tax professional with the preparation of individual tax returns.

The IRS provides free tax preparation assistance online, by phone, and at local offices throughout the US. Please see the IRS website for details.

The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help to low- to moderate-income ($36,000 and below) people who cannot prepare their own tax returns. To locate the nearest VITA site, call 1-800-829-1040.

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