Payroll Services Taxation

US Citizens and resident aliens – scholarship payments that are for tuition, fees or course-related expenses are neither taxable to the recipient, nor reportable by the University. Scholarship payments (to US citizens and resident aliens) in excess of tuition, fees and course related expenses are not reportable to the IRS by the University, yet are includeable and reportable as taxable income by the recipient.

Non-US Citizens – scholarship payments to non-resident aliens that are for tuition, fees and course related expenses are reportable on form 1042S as income code 15, although the University has no withholding requirement. Scholarship payments in excess of tuition, fees and course related expenses are reportable and taxable at a 14% withholding rate, if treaty benefits do not exempt this income from taxation.

Additional Information:

Scholarship payments, to, or on behalf of US Citizens or resident aliens, do not place any IRS withholding, reporting or remittance requirements on WSU, except that scholarship and fellowship payments are included on the IRS informational form, 1098T.

Scholarship and fellowship payments, to, or on behalf of non-residents are reportable on form 1042S.

Scholarship payments to non-resident aliens in excess of tuition fees and course related expenses are taxable at 14%, unless a tax treaty exists to exempt this value from taxation (although it is still reportable on form 1042S).

Non Service Fellowship periodic payments to non-WSU matriculating student, who are US Citizens, should be processed through Accounts Payable.

Non Service Fellowship periodic payments to non-WSU maticulating students who are non-resident aliens should be processed through Accounts Payable and the appropriate withholding, depositing, reporting and remittance must occur.