Anyone know how the tax stuff works

[TTU_Awardee]

I'm not sure if I need to file the taxes (supposedly every quarter) on my own through irs.gov or through paperwork given by SMART. Anyone know this works?

[Guest]

I'm not sure if I need to file the taxes (supposedly every quarter) on my own through irs.gov or through paperwork given by SMART. Anyone know this works?

You will want to find a CPA to discuss tax filing reqs. Be sure to ask about any prior year safe harbor, since this is your first year of SMART tax liability.

As a clue: there is no paperwork from SMART on the subject. It is entirely between you and the IRS. You also do not use "irs.gov" to file quarterly. You will be looking for 1040-ES.

But like I say, you should contact a tax professional if you don't feel like you'll be able to digest the tax code in the next several weeks.

The deadline for quarter 3 tax payment was 9/17. You won't have to pay your 4th quarter tax payment until 1/15, but you will need to either pay the quarterly tax payment or file your completed return by that date.

[Inuyushi]

Hey TTU awardie mean Texas Tech? That's where I went! Congrats!

I think SMART just gives you a 1099 at the end of the year. Which means 15% of what you get goes back as "self-employment" tax. Be prepared, it can hurt.

[Guest]

Hey TTU awardie mean Texas Tech? That's where I went! Congrats!

I think SMART just gives you a 1099 at the end of the year. Which means 15% of what you get goes back as "self-employment" tax. Be prepared, it can hurt.

Income from SMART is not subject to the self-employment tax because of the box it is listed in on the 1099-MISC.

[Inuyushi]

Eh, it's been a while. I couldn't really remember, but thanks for the verification.

[Guest]

Eh, it's been a while. I couldn't really remember, but thanks for the verification.

You are actually not that far off. Income in Box 3 of the 1099-MISC is very suspect to the IRS. Especially when it's a gigantic amount.

It will really depend on your CPA. If they are the hand-wringing type who play the game conservatively, they will tell you to pay self-employment tax (15% + your marginal tax). If they are more aggressive, they'll just have you pay the income tax.

Good luck.

[Guest]

If you follow the instructions from the IRS directly, our income is not subject to self-employment tax.

I believe the only people who would benefit from calling this "self-employment" are those people who are very near to retirement. This is clearly not self-employment.

[TTU_Awardee]

Hey TTU awardie mean Texas Tech? That's where I went! Congrats!

I think SMART just gives you a 1099 at the end of the year. Which means 15% of what you get goes back as "self-employment" tax. Be prepared, it can hurt.

Yeah I am at Texas Tech (Electrical Engineering working on high power microwave plasmas). What department are you from?

[Inuyushi]

I'm from Mechanical Engineering. 2010 grad. Use your time in school wisely!

[Guest]

If you follow the instructions from the IRS directly, our income is not subject to self-employment tax.

I believe the only people who would benefit from calling this "self-employment" are those people who are very near to retirement. This is clearly not self-employment.

Do you mean the instructions that enumerate what Box 3 can be used for? A scholarship for service is not found in that list.

Or maybe the instructions that mention if you do ANY work for ANY money found in Box 3, you are responsible (not ASEE) for reclassifying that money to Box 7, which is subject to SE tax. So you are responsible for telling the IRS why your 8 or 12 week internship does not constitute ANY work.

It's not hard to justify, but you cannot pretend it's as black and white as you want it to be. Like I said previously, your accountant (if you choose to use one) will be responsible for the justification if the IRS starts asking questions. If your accountant is daring, you will likely not be paying any SE tax. If your accountant is conservative, you will want to save your money because he'll ask you to pay a bunch of taxes.

There's a reason why SMART refuses to give guidance on this point. Because one of the beginning cohorts (as late as 2008, I believe) was actually brought on as employees of the Naval Postgraduate School over their summer to handle this very issue: whether or not the internship counted as contract work/employment or whether it was something else. SMART knows it's hard to find direction in the IRS manuals, and therefore refuses to comment on the issue.

As well, if you've read the IRS instructions, you'll know that they specifically mention a 1099-MISC is not to be used for scholarships/fellowships.

Good luck.

[Inuyushi]

Yea, I looked it up and remember having to pay SE. Like the person above me said, it's not too avoidable. Personally, I always found it strange that the government taxes it's own payments. Oh well. Some money is better than no money!