Stipend Payment Guidelines

To provide greater clarity, West Virginia University (“the University”) has developed the following guideline related to the payment of stipends. In general, the term “stipend” is defined as follows:

A fixed regular sum paid as a salary or allowance.

The term stipend is used to describe various types of payments made by the University and is often used differently by departments within the University community. “Stipend” is used as a virtual catch-all category for a variety of payments but often takes the form of a subsistence allowance given to students to help defray living expenses during the educational or training experience; as additional funding for their education; and/or as compensation for work performed.

The primary purpose of these guidelines is to assist University departments in identifying the type of stipend payment being made to the individual and to provide instruction regarding which University payment system should be utilized to process the payment. Departments should first assess the purpose of the payment to determine how it should be classified and based on that determination, the department should use these guidelines to determine the best payment method. It is important to ensure proper classification of payments to satisfy compliance requirements with federal and state financial aid rules, IRS tax reporting requirements, the Fair Labor Standards Act, other federal and state regulations, and University rules and policies. In addition to these guidelines, please see the Stipend Determination Flowchart to aid in determining the proper payment method for stipends. When conflicting rules, policies and/or requirements are present, to ensure overall compliance, departments should work with WVU Tax Services and Student Financial Services, which will convene a small committee for the purpose of determining the correct classification, type of stipend, payment method, and overall treatment of the payment. It is important to understand the details surrounding the stipend payment to facilitate accurate treatment and financial aid and tax reporting for both the individual and the University.

General Tax Considerations

All payments, including employment wages, compensatory stipends, non–compensatory stipends, gift aid, human subject payments, etc., paid to an individual are considered potentially taxable income by the IRS. Depending upon the type of payment and the related reporting requirements, the University may or may not have a reporting obligation including issuance of Forms W-2, 1098-T, 1042-S, 1099-NEC, and/or 1099-MISC.

Regardless of the University’s reporting responsibility, it is the recipient’s personal responsibility to ensure that all potentially taxable income is reported on their individual tax return. For payments of non-compensatory educational-related stipends whether paid to a WVU student or a non-WVU student, the following language is recommended by Tax Services to be included by departments on both their web site and in any communication made with the individual regarding their non-compensatory stipend.

All non-compensatory stipend payments provided to individuals as aid in their educational pursuit are considered potentially taxable income by the IRS dependent upon their individual tax situation and their related qualified educational expenses as defined by the IRS. For additional information regarding the taxability of non-compensatory stipends and other forms of gift aid, please see IRS Publication 970 and/or irs.gov.

Definitions

Cost of Attendance (COA): also known as the budget, is an estimate of that student’s educational expenses for the period of enrollment. Any eligible institution of higher education that receives Title IV, Higher Education Act (HEA) funds must create a uniform Cost of Attendance for similarly enrolled students. See 20 U.S. Code § 1087II

Estimated Financial Assistance (EFA): any funds for a period of enrollment that a student (or a parent on behalf of a student) will receive from Federal, State, institutional, or other sources in accordance with 34 CFR § 682.200

Title IV Aid: refers to the financial aid programs for postsecondary students, authorized under Title IV of the Higher Education Act of 1965, as amended (Title IV, HEA) and administered by the U.S. Department of Education and listed in 34 CFR 668.1(c)