Tax Determination Comparison | Kent State University

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

Interest and Penalties for Improper Reporting

  1. 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)
  2. Failure to make timely deposits
    .5% of unpaid tax for each month the payment is late up to a maximum of 25%
  3. Interest
    Determined based upon the federal short term rate plus 3%
  4. 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.)