- It is important for students to recognize that all payments including wages, scholarships, fellowships and stipends are potentially taxable income to the student even if WVU is not required to report the payment on a tax form such as a Form W-2 or Form 1098-T.
- It is the responsibility of the individual student to ensure all applicable taxes are paid. See IRS Publication 970 Tax Benefits for Education [External Link] or consult with a professional tax preparer for additional information.
Category 1 - Scholarship
A scholarship payment is generally an amount paid for the benefit of a student at an educational institution to aid in the pursuit of studies. Scholarship payments are processed by the Financial Aid Office through the Banner system. The payments are not subject to tax withholding (Federal, state or FICA), and are reported by WVU on IRS Form 1098-T.
Category 2– Fellowship
The purpose of a fellowship payment is to further the education and training of the
student in his or her individual capacity. Fellowship payments are paid to, or
for the benefit of, an individual primarily to aid in the pursuit of study or research.
To qualify as a fellowship payment, the payment must be a relatively disinterested
"no strings attached" educational grant. Fellowships are processed by the Financial
Aid Office through the Banner system. The payments are not subject to tax withholding
(Federal, state, or FICA), and are reported by WVU on IRS Form 1098-T. Note - NIH
training grants are always classified as fellowships.
Category 3 – Contest Prizes/Awards
Prizes such as awards won in a contest are not scholarships if the recipient
does not have to use the award for educational purposes. Contest prizes/awards
are processed by the WVU Accounts Payable system. The payments are not subject
to tax withholding (Federal, state, or FICA), and the University will report amounts
greater than $600 on IRS Form 1099. Prizes/awards tied to the students education
are considered a form of gift aid an are reported by WVU on IRS Form 1098-T.
Category 4 – Wages/Service Stipend
An amount paid for “services rendered” as employment including student worker position
or as a part of a service stipend arrangement is a “wage” under IRS regulations
and must be paid as salaries and wages. Wages/service stipends are processed via
the payroll system and are subject income tax withholding and are reported on IRS
Form W-2. Contest prizes and awards to students specifically and directly related
to their employment by WVU are included as wages and processed through the WVU
Category 5 – Payments to International Students are considered Non-Resident Aliens
for income tax purposes
The above categories are applicable to US residents and International Students are
considered Non-Resident Aliens for Income Tax purposes. Payments to non-resident
alien students of scholarships,fellowships,prizes/awards and wages are subject
to different IRS and US treaty guidelines. For payments to non-resident aliens,
contact WVU Tax Services.
Categorizing a Student Payment
Historically, various terms and terminology have been used by the academic community to define student payments. An amount received by a student need not be formally designated as a fellowship/scholarship to be considered one. For example, an “allowance” is treated as a fellowship/scholarship if it meets the IRS requirements of a fellowship/scholarship. Clarifying the true substance of a disbursement transaction is critical to assigning student payments to the respective categories to ensure appropriate WVU processing. The following table provides key questions to serve as a litmus test for defining the substance of student payments and proper processing. If there are questions regarding the categorization of a student payment, WVU’s Tax Services unit should be consulted.