Introduction to tax reporting content for UC Davis students
For non-resident students and scholars
- Student wages maybe exempt from FICA. Please review the description in the FICA Codes Table
- I want to award a scholarship to an active student. How do I do this?
The appropriate process is to pay scholarships to active students is through Banner. Please work with Student Accounting. If a scholarship for an active student is submitted through KFS it will be returned to the department and delay the delivery of the funds.
- When does the University report fellowships for scholarships?
- The answer is dependent on the residency of the recipient.
United States citizens or resident aliens – The IRS does not require the university to report scholarship or fellowship grants for United States citizens or resident aliens; however, recipients of non-qualified scholarship and fellowship amounts should be advised that such amounts are taxable and that it may be advisable for the recipients to make estimated tax payments.
Under IRC Section 117, the determination of whether a scholarship or fellowship grant must be reported to the IRS by the recipient is based on whether the grant (or a portion of the grant) is qualified or non-qualified and whether the recipient is a degree or a non-degree candidate.
1. Degree Candidates
> Qualified Amounts: The portion of a qualified scholarship or fellowship grant used for tuition and fees and related course requirement expenses is excludable from the recipient’s gross income if the recipient is a candidate for a degree for the purpose of studying or conducting research at an educational institution.
> Nonqualified amounts: The portion of a scholarship or fellowship grant received for incidental expenses, e.g., room and board, travel, research, benefits, and expenses for equipment and other items not required for either enrollment or attendance in a course of instruction is not excludable from gross income. Therefore, such expenses are taxable.
> Tax Reporting: Although neither the qualified nor the nonqualified portion of such grants is subject to income tax reporting or withholding, any amount used for nonqualified expenses must be reported by the recipient on his or her U.S. and California Income tax return.
2. Non-Degree Candidates and Post-Doctoral Fellows
No amount of a scholarship or fellowship grant received by a non-degree candidate (including a post-doctoral fellow) is considered qualified; therefore, the entire amount of the grant is taxable and must be reported by the recipient on his or her tax return.
Nonresident Aliens: Under IRC Section 1441, the University as the withholding agent is required to report income and withhold Federal income tax from all income payments made to or on behalf of a nonresident alien, unless the payment is excluded under specific exemptions. The most common exemption is a tax treaty. All Nonresident aliens are required to complete Glacier registration which will advise if there is an applicable tax treaty exclusion.
Absent exclusions, non-wage payments made to a nonresident alien that has been determined to be taxable are subject to income tax withholding at a 30% rate. However, a special 14% rate applies to any taxable scholarship or fellowship grants paid to F or J visa holders.