Scholarship and fellowship payments may be taxable, depending upon whether the payments are classified as qualified or nonqualified under the Internal Revenue Code and related guidelines. As part of a recent review, the Office of Finance and Treasury has updated its guidance for specific funding purposes such as senior thesis research, junior independent work, and graduate language training, among others. Changes have been made to Student Activities Funding Engine (SAFE) to ensure these funding purposes are being classified appropriately for tax purposes.
More information is available on the Finance and Treasury website. If you have questions, please email [email protected].
Frequently Asked Questions
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What has changed for students?
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Previously, payments in SAFE were largely considered taxable. While most students did not have taxes withheld from their award payments, they received a letter from Finance and Treasury informing them that their award may be taxable. They were responsible for reporting the income on their personal tax returns. Note: Many international students DID have taxes withheld from their SAFE payments if their visa or home country tax treaty required it for their specific activity.
Going forward, students receiving payments for activities deemed “qualified” (non-taxable) will not receive the letter from Finance and Treasury and international students will not have taxes withheld from their payments.
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How does the University determine which payments are taxable and which are not?
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F&T has developed a process for analyzing students’ activities and determining whether or not the award will be taxable or non-taxable. They have analyzed many common activities and have made the lists, and the criteria, available for review at: https://finance.princeton.edu/how-to/tax-compliance/students-groups-foreign/scholarships-fellowships/
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What do SAFE funding administrators need to do differently?
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SAFE funding administrators will create opportunities and award funding exactly the same as before this change. The only change is on the Pay Awards page. When paying an award, the funding opportunity administrator will now select either the default account or one of the options in the drop-down menu. If the activity you are funding does not match with one of the specific “funding purpose” options, you simply select the default option.
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Do I determine whether or not the student’s award should be taxable or non-taxable?
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No. After thorough analysis, Finance and Treasury has determined which specific activities will be treated as qualified (non-taxable) or non-qualified (taxable) payments. We have built workflows into SAFE so that funding administrators simply need to accurately select the type of activity they are funding.
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What if I don’t want my students’ awards to be taxable?
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What are the account/funding purpose options?
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There are different funding purpose options for each SAFE activity type. The table below shows all options.
Activity Type SAFE "Funding Purposes" Account Code UG Senior Thesis Research SENIOR THESIS RESEARCH default (5571) 5571 UG Independent Project INDEPENDENT PROJECTS default (5572) 5572 JUNIOR PROJECT/RESEARCH (5576) 5576 UG Internships UG INTERNSHIPS default (5572) 5572 UG Summer Study Abroad SUMMER STUDY ABROAD default (5575) 5575 PU PROGRAM apprvd for cr (5576) 5576 NON-PU PROG apprvd for cr (5576) 5576 Graduate Research GRADUATE RESEARCH default (5533) 5533 WWS MPA POLICY WORKSHOPS (5514) 5514 LANG TRNG REQ'D FOR DEGREE (5514) 5514 Graduate Internships GRADUATE INTERNSHIPS default (5534) 5534 WWS MPA INTERNSHIPS (5514) 5514 Graduate Conferences GRADUATE CONFERENCES default (5533) 5533 -
Which funding purpose option should I select when paying an award?
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Choose the default option unless you are funding one of the specific activities listed.
Some tips to help you decide:
- Read the student’s application. The application will give you the information you need to decide which funding purpose to select when paying the award. Pay specific attention to:
- Project Title
- Answers to application questions. Note that we have added a question to the UG Independent Project application asking whether or not the student’s activity is related to Junior Project/Research.
- Project proposal/description
- Ask student for clarity, if needed.
- Read the student’s application. The application will give you the information you need to decide which funding purpose to select when paying the award. Pay specific attention to: