FELLOWSHIP TAX INFORMATION

1. FELLOWSHIP TAX INFORMATION

2. Tax-Free Fellowships US Persons- Fellowships are tax free only if: • You are a candidate for a degree at an eligible educational institution, and • You use the fellowship to pay qualified education expenses. Nonresident aliens – Taxable at 14% unless from a Tax Treaty country.

3. Qualified Education Expenses Expenses for US Persons: • Tuition and fees required to enroll at or attend the eligible institution, and • Course-related expenses, such as fees, books, supplies, and equipment that are required for all students in your course of study.

4. Non-qualifying Expenses-US Persons Expenses that do not qualify: • Room and board, • Travel, • Research, • Clerical help, or • Equipment or other expenses not required for enrollment.

5. Fellowship Chart-US Persons

6. Fellowship Worksheet-US

7. Example 1 • You received a fellowship of $10,000. You are not a candidate for a degree. The $10,000 you received is taxable.

8. Example 2 • You receive a fellowship for $10,000 and a $2,000 scholarship required to be used for room and board. You are a candidate for a degree at an eligible educational institution. Tuition, books, and other required fees total $8,000.

9. Example 2 – cont 1. Total Scholarship/Fellowship: $12,000 2. Amt. paid for teaching, etc.: $0 3. Subtract line 2 from 1 $12,000 4. Amt. required for non-qualified exp.: $2,000 5. Subtract 4 from 3 $10,000 6. Amount used for qualified ed. exp: $8,000 7. Subtract 6 from 5 $2,000 8. Taxable Part: Add 2,4, and 7. $4,000 ______________ _______ __

10. Reporting Requirements • For US persons, it is the taxpayer’s responsibility to report taxable fellowships. • Fellowship statement • For Nonresident Aliens, it is the responsibility of Purdue to report taxable and nontaxable amounts of fellowships. • 1042S that you print from Glacier

11. Example of Fellowship Statement To: Purdue Pete SS #: 111-11-1111 Department: Aero and Astro Engineering From: Tax Department Subject: FELLOWSHIP PAYMENTS For your information, you were paid a total of $1,869.00 as a fellowship by Purdue University during calendar year 2007. This amount has not been reported on Form W-2, Wage and Tax Statement.

12. Federal Estimated Tax Payments US persons - Required if owe $1,000 in taxes and the amount you have withheld is less than the smaller of: • 90% of taxes shown on your 2007 tax return, or • The tax shown on your 2006 return. Use IRS form 1040-ES to determine 2007 tax liability

13. Federal Estimated Tax Payments – cont. Nonresident Aliens – Purdue will withhold taxes from fellowship, if required, at the rate of 14% The actual amount of taxed owed on the fellowship may differ from the 14% and will be determined based on all income reported on the 1040NR Federal Tax Return

14. State and County Tax State and County Taxes apply to the taxable amount of any fellowship For information on making estimated payments, refer to the Indiana Department of Revenue website: http://www.in.gov/dor/individual/estimated.html

15. Glacier for Non-Resident Aliens • Your Business Office will set-up a Glacier account for you. • You will receive an email from support@online-tax.net with your login instructions. • Log into Glacier and key in your immigration information and details of prior visits to the US.

16. Glacier – cont. • Glacier will determine the taxability of your fellowship. • Print out from Glacier your: • Tax Summary Report • Required IRS tax forms • Mail or deliver above forms and copies of required immigration documents to Trent Watkins in Freehafer Hall.

17. Helpful Websites • Publication 970 - http://www.irs.gov/publications/p970/index.html • Form 1040-ES – Estimated Tax Payment Instructions – http://www.irs.gov/pub/irs-pdf/f1040es.pdf • IRS Website’s Frequently Asked Questions – http://www.irs.gov/faqs/faq9-3.html

18. Contact Information Lauren Lacy (765) 494-1697 lemaxwell@purdue.edu