Graduate Student Funding and Taxation Policy
The purpose of this policy is to ensure proper tax withholding and reporting for graduate students receiving funding from federally sponsored research grants, training grants, or university sources.
This policy and related procedures are applicable to all graduate students whose funding is from federally sponsored research grants (R01), training grants (T32, T34, T35 & F32), and Drexel University financial aid scholarships/fellowships.
Section 3121(a) of the Internal Revenue Code (IRC) defines wages for purposes of Federal Insurance Contributions Act (FICA) tax (Social Security and Medicare), as all remuneration for employment, with certain exceptions. Section 3121 (b) of the IRC defines employment as services performed by an employee for an employer, with certain exceptions. Section 3121(b)(10) of the IRC excepts from the definition of employment, services performed in the employ of a school, college, or university, or an affiliated non-profit organization, if the service is performed by a student who is enrolled and regularly attending classes at that school, college or university.
Whether an employee has the status of a student is determined based on the employee's relationship with Drexel University. An employee who performs services in the employ of Drexel University as an incident to and for the purpose of pursuing a course of study at Drexel University has the status of a student in the performance of those services. Employment that is not incident to and for the purpose of pursuing a course of study does not qualify for the exception.
Career employees eligible for employee benefits and participation in Drexel University's retirement plan are not eligible for the Student FICA exception, because their employment is not considered to be incident to and for the purpose of pursuing a course of study.
An individual who is a half-time undergraduate, graduate or professional student and who is not a career employee will qualify for the Student FICA exception under IRS Rev. Proc. 98-16 with respect to services performed at Drexel University. Services performed by a Drexel University student for any other employer do not qualify for this exception. For example, students working for another employer during their co-op experience.
Graduate or professional student
A graduate or professional student is a student who:
- Is enrolled at Drexel University for the purpose of obtaining a degree, certificate or other recognized educational credential above the baccalaureate level or is enrolled in a program leading to a professional degree;
- Has completed the equivalent of at least three years of full-time study at an institution of higher education, either prior to entrance into the program or as part of the program itself; and
- Is not a postdoctoral student, postdoctoral fellow/researcher, medical resident, or medical intern.
Half-time graduate or professional student
A graduate or professional student as defined above, who is carrying at least a half-time academic workload as determined by Drexel University's standards and practices for graduate and professional students.
Employee Classes and Account Codes
The table below provides the applicable employee classes and account codes related to processing EPAFs for variance graduate employee categories:
|Type of Graduate Employee
Graduate Students Enrolled Full-Time and Receiving a Stipend and/or Tuition Remission from a Federally Sponsored Research Program
Graduate students who are enrolled full-time and receiving a stipend and/or tuition remission from a federally sponsored research program are subject to the following terms and conditions.
Under 2 CFR 200.466 of the Uniform Guidance and Section 117(b) of the Internal Revenue Code, the amount paid to graduate students as a stipend is considered wages subject to federal income tax withholding. In addition, such amounts are reportable on Form W-2 at year-end.
The following graduate student appointments are limited to individuals registered for a full course of study in the graduate or professional programs at Drexel University. All graduate student appointments must include as part of the new hire paperwork a completed electronic Personnel Action Form (ePAF).
Graduate Research Assistant
A Graduate Research Assistant (GRA) is generally a full-time graduate student hired to aid the research of a principal investigator or a member of the faculty. Equivalent research is not a requirement of all candidates for the degree in the student's particular program. The typical source of funding for a GRA is a federally sponsored research grant (e.g. R01). A GRA's stipend is considered compensation for the research services rendered by the student. Therefore, the stipend is considered taxable compensation subject to Federal, Pennsylvania and City of Philadelphia wage tax withholding. The stipend would be exempt from FICA tax if the student is enrolled for at least a half-time academic workload.
Graduate Teaching Assistant
A Graduate Teaching Assistant (GTA) is a full-time graduate student enrolled in a degree program that teaches or guides undergraduate or graduate students under the direction of a faculty member. Generally, the GTA's stipend is funded by the student's home department. A GTA's stipend is considered taxable compensation for Federal, Pennsylvania and City of Philadelphia tax withholding purposes. The stipend would be exempt from FICA tax if the student is enrolled for at least a half-time academic workload.
Graduate Research Fellow
A Graduate Research Fellow (GRF) is a full-time graduate student receiving a stipend for research directly related to the program or specialty in which his or her degree is to be conferred. The research component is a requirement of all candidates in that program as a condition for receiving such degree. The source of funding is typically departmental funds, a federally sponsored research grant or a private foundation grant, such as the American Heart Association. A GRF's stipend is considered taxable compensation for Federal and City of Philadelphia tax withholding purposes. However, since the research component is a requirement for all candidates in the students program, the stipend is not subject to Pennsylvania personal income tax withholding. The stipend would be exempt from FICA tax if the student is enrolled for at least a half-time academic workload
Graduate Student Appointments Requiring No Personal Service of the Student
N.R.S.A. Pre-Doctoral Fellow
A National Research Service Award (N.R.S.A.) Pre-Doctoral Fellow is an individual with a baccalaureate degree who is enrolled in and training at the post baccalaureate level in a program leading to a Doctor of Philosophy (PhD) or Doctor of Science (ScD) degree or a combined clinical degree and PhD degree such as MD/PhD. The source of funding is a National Research Service Award institutional or individual grant. A stipend is provided as a subsistence allowance for fellows to help defray living expenses during the research training experience. It is not provided as a condition of employment with either the Federal Government or Drexel University. One stipend level is used for all predoctoral candidates, regardless of the level of experience. Stipend levels are published in the NIH Guide for Grants and Contracts.
The stipend is not considered wages subject to withholding by Drexel University. There is no Wage and Tax Statement (W-2) reporting required by Drexel University under IRS Notice 87-31. Students should obtain IRS Publication 520 (Scholarships and Fellowships) to determine if any part of the stipend is taxable on their personal federal income tax returns. Since the stipend is not considered compensation for services rendered it is not subject to FICA, Pennsylvania, and Philadelphia tax withholding.
A Graduate Assistant (GA) is a full-time graduate student hired to perform administrative tasks or assist a faculty member with special projects. A GA receives a salary for the administrative duties and may also receive tuition remission. The source of funding is typically departmental unrestricted funds. The salary is conditioned upon the performance of necessary administrative work or services performed on special projects for faculty members. The GA position should not be used for work performed on federal research or training grants. The salary is considered taxable compensation subject to federal, Pennsylvania and City of Philadelphia wage tax withholding. The stipend would be exempt from FICA tax if the student is enrolled for at least a half-time academic workload at the time he/she is appointed in the GA position.