Tax Determination Comparison

Comparison Tables

Tax Determination Comparison Reporting and Taxation
Type	Scholarship or Fellowship	Award	Independent Contractor	Employee
Reporting	Not reportable	1099‐Box 3	1099‐Box 7	W‐2
Taxation	Excluded from income to the extent there are qualified expenses	Taxable, no withholding	Taxable, no withholding	Taxable, withholding

APPLICABLE TAXES AND BENEFITS
Type	Scholarship or Fellowship	Award	Independent Contractor	Employee
Federal Tax	Yes, if not used on qualifying expenses	Yes	Yes	Yes
State Tax	Yes, if not used on qualifying expenses	Yes	Yes	Yes
Local Tax	No	Yes	Yes	Yes
Social Security Tax	No	No	Yes	No
Medicare Tax	No	No	Yes	Yes unless student exception applies
OPERS Contribution	No	No	No	Yes unless student exception applies
Worker's Compensation Insurance	No	No	No (contractor pays)	Yes ‐ estimated at .4%

POTENTIAL DEDUCTIONS
Type	Scholarship or Fellowship	Award	Independent Contractor	Employee
Tuition, Books, Education Fees	Exclude from income if qualifying expenses, if expenses exceed scholarship income may be eligible for education credits or the education deduction	May be eligible for education credits or as a deduction from gross income	Usually not applicable	May be eligible for education credits or as a deduction from gross income

Liable for payment of tax
Whether or not the tax was collected unless show income tax liability was paid (i.e. misclassified employee as I/C)
Failure to make timely deposits
.5% of unpaid tax for each month the payment is late up to a maximum of 25%
Interest
Determined based upon the federal short term rate plus 3%
Failure to file penalty
W‐2's ‐ $50 per return; 1099's ‐ $100 per return
(Penalties can be abated with reasonable cause. Interest and withholding tax will not be abated.)