The Unofficial SMART Scholarship Forum

by **Guest** » Tue Apr 17, 2012 9:04 am

Guest wrote:
tdavis4 wrote:So I'll just pay it on my ISP and not my monthly stipend.
I haven't gotten ISP yet, but if it comes in the same box as the stipend on the 1099-misc you don't pay self-employment tax on it. Maybe another current scholar can comment on this. I think the other person that posted reclassified that pay mainly to utilize a Roth benefit.

Correct. You are only allowed to put "earned income" into an IRA (either Roth or traditional). If your only income all year is found in a box 3 of a 1099-MISC, as it was in my case, you technically are not allowed to put any money into retirement. Box 3 is not considered "earned income" by the IRS.

Really it will depend a lot on your CPA. If you have an ultra-conservative CPA, they're probably going to try and get you to pay self-employment taxes on the entire SMART scholarship. They do this because the IRS places the burden of the characterization of the income on the scholar, not ASEE. And CPAs are very wary of income listed in Box 3 as there's a drastically shorter list of acceptable sources for that income. Box 7, on the other hand (where you definitely must pay self-employment) is a catch-all box used to basically place income not classified in the other boxes of the 1099-MISC.

If your CPA tries to get you to pay over $10k in taxes, find a new CPA. Heck, even TurboTax asks you like, 3 times "Are you SURE this money shouldn't go in Box 7? Are you positive you did no work to receive this money?" if you try and enter a 1099-MISC with the income into Box 3. It's CYA (Cover your behind) on the part of Intuit and whatever CPA you're using.

by **Guest** » Tue Apr 17, 2012 8:23 am

tdavis4 wrote:So I'll just pay it on my ISP and not my monthly stipend.

I haven't gotten ISP yet, but if it comes in the same box as the stipend on the 1099-misc you don't pay self-employment tax on it. Maybe another current scholar can comment on this. I think the other person that posted reclassified that pay mainly to utilize a Roth benefit.

by **tdavis4** » Tue Apr 17, 2012 1:32 am

So I'll just pay it on my ISP and not my monthly stipend.

by **Guest** » Mon Apr 16, 2012 8:30 am

tdavis4 wrote:Does anyone else not pay social security taxes for medicare and medicade?

No since it's not from employment or self-employment.

by **Guest** » Mon Apr 16, 2012 8:07 am

tdavis4 wrote:Does anyone else not pay social security taxes for medicare and medicade?

I paid them on my ISP, because I felt like it was money for work performed, but not on my stipend payments or book allowance.

Also, I put money into an IRA. In order to do that, you need to work for it, which means you need to pay self-employment tax on it, which means you need to reclassify it to box 7 of the 1099-MISC.

Talk to either the IRS helpline or your accountant if you're wondering if you've been overpaying.

by **tdavis4** » Mon Apr 16, 2012 12:36 am

Does anyone else not pay social security taxes for medicare and medicade?

by **Guest** » Sat Apr 14, 2012 12:30 am

i am ian wrote:
Guest wrote:There are a few situations that enable you to avoid a penalty. For example, at the end of the first year of SMART for me I had 0 tax liability so I didn't pay quarterly taxes in year 2 and there was no penalty. There are other situations so look at it closely. I think one of them may be if you didn't have to pay quarterly taxes last year...but don't take my word for it. Anyway, the penalties are crazy low. My penalties would have only been like 30 bucks and I made over $50k the second year of SMART. I had to pay about $1500 in taxes at the end of the year. These are ballpark numbers only. If you don't mind a little penalty then just don't pay them...avoid the hassle.

I didn't claim moving expenses...but perhaps I should have. I'm going to look into that. I don't have the receipts though, I'd have to prove it off bank statements...

How did you only pay 1500 in taxes on 50k of smart scholarship money?

I made 48k last year for my smart stipend and internship and my taxes came out to over 4k.

I would greatly appreciate any info.

I'm not single-1. I am married-4. $2000 in child tax credits, over $13k in standard deduction.

By the way, someone asked about moving expenses. I have it from a CPA that we cannot deduct internship costs as moving expenses. Also, we cannot itemize those as deductions because 1) they are not officially job related since we aren't employed by SMART 2) SMART includes these costs as other compensation on the 1099-MISC with the stipend money. However, since we are NOT employed by SMART and we do not receive the money in return for any services we do NOT have to pay self-employment taxes (social security, medicare etc...).

by **i am ian** » Fri Apr 13, 2012 11:01 pm

Guest wrote:There are a few situations that enable you to avoid a penalty. For example, at the end of the first year of SMART for me I had 0 tax liability so I didn't pay quarterly taxes in year 2 and there was no penalty. There are other situations so look at it closely. I think one of them may be if you didn't have to pay quarterly taxes last year...but don't take my word for it. Anyway, the penalties are crazy low. My penalties would have only been like 30 bucks and I made over $50k the second year of SMART. I had to pay about $1500 in taxes at the end of the year. These are ballpark numbers only. If you don't mind a little penalty then just don't pay them...avoid the hassle.

I didn't claim moving expenses...but perhaps I should have. I'm going to look into that. I don't have the receipts though, I'd have to prove it off bank statements...

How did you only pay 1500 in taxes on 50k of smart scholarship money?

I made 48k last year for my smart stipend and internship and my taxes came out to over 4k.

I would greatly appreciate any info.

by **tdavis4** » Fri Apr 06, 2012 12:58 am

Let me know if you find anything

by **Guest** » Wed Apr 04, 2012 8:11 pm

There are a few situations that enable you to avoid a penalty. For example, at the end of the first year of SMART for me I had 0 tax liability so I didn't pay quarterly taxes in year 2 and there was no penalty. There are other situations so look at it closely. I think one of them may be if you didn't have to pay quarterly taxes last year...but don't take my word for it. Anyway, the penalties are crazy low. My penalties would have only been like 30 bucks and I made over $50k the second year of SMART. I had to pay about $1500 in taxes at the end of the year. These are ballpark numbers only. If you don't mind a little penalty then just don't pay them...avoid the hassle.

I didn't claim moving expenses...but perhaps I should have. I'm going to look into that. I don't have the receipts though, I'd have to prove it off bank statements...

by **tdavis4** » Wed Apr 04, 2012 7:29 pm

Did anyone claim any moving expenses for their travel costs to summer internships on taxes?

by **Guest2** » Wed Mar 28, 2012 8:33 am

tdavis4 wrote:quarter

Search the internet, there's plenty of knowledge out there. Lots of calculations to follow. The 1040-ES worksheet is the best thing to use. Use the internet as a supplement to explain why you're putting in each set of numbers in each line if you're confused.

However, the EASIEST thing to do is get your prior year's tax liability (it's the Total Tax line of your previous year's return minus any credits you had) and divide that by 4. This will not guarantee you a refund, but it will guarantee that you won't be paying a penalty.

I'm anal about giving the government too much of my money, so I always try and withhold the minimum. But you should be MOST worried about penalties, as those are more costly than an interest free loan to the government. In fact, the first year I had SMART I had to pay like $3000 in taxes in April because I had paid quarterly taxes of $0. However, I didn't have to pay any penalties because I had already withheld the prior year's tax liability.

by **tdavis4** » Tue Mar 27, 2012 12:47 pm

quarter

by **tdavis4** » Tue Mar 27, 2012 12:45 pm

I did have a penalty for this last year I'm gonna do my first quarterly now. How muchdyou pay a quaer?

by **recipient21** » Tue Mar 27, 2012 8:43 am

tdavis4 wrote:Does anybody use the 1040-ES form to pay quarterly taxes?

I did during my second year. If you don't use it you will likely have a penalty to pay at the end of the year.

My first year was covered under a "prior year safe harbor" provision in the tax law. Basically, the year before joining SMART I had a refund due, and I applied my tax liability for the year (it was about $400) toward the next year's tax due (the tax due the first year I had SMART).

by **tdavis4** » Tue Mar 27, 2012 1:21 am

Does anybody use the 1040-ES form to pay quarterly taxes?

by **guest71** » Mon Mar 26, 2012 11:49 am

I would recommend that you run your taxes both ways, both as a dependant with your parents and separately. Whichever way gives your family the most total benefit would be what I would go with--- and if it's better financially for them to claim you, maybe you can make a deal with your folks that they reimburse you for any extra taxes you have to pay, but they still get the deduction/credit(s) for you. If it were my folks, they would have done it that way, but we have a good relationship and no money weirdness.

by **Guest11111** » Sun Mar 11, 2012 9:52 pm

The way dependents work on taxes, if you pay more than half of your living expenses, you are able claim as independent. In fact your parents shouldn't claim you. Aside from causing a rift, you can dispute being claimed.

by **taxesblow** » Sun Mar 11, 2012 8:43 pm

My parents claimed me the first tax season after I started getting smart payments and I was livid. The way taxes work is that your parents get a dependent credit for claiming you ($3,700). And if you are a dependent, you don't get deductions on the income you've made, your parents get them. For most college kids, it's usually not a big deal to be claimed until they graduate but when you haven't had taxes taken out the whole time it adds up and not being able to get deductions from it makes it even more. 2010 taxes I had like 10 or 11,000 taxable from SMART. I paid $1,500 in, and was told it would have been close to $300 if I was filing independent. File on your own if you can. This year because its been a full year with SMART and my internship, I had about $36,000 taxable. So I filed on my own and got to deduct a lot of the expenses from my internship so I will hopefully not have to pay in as much. I'm still waiting for them to be finished.. Anyways there's technically a lot of rules for parents claiming kids, but they get swept under the rug when it's going to help them out. :/

by **RPI CSE** » Fri Mar 09, 2012 9:50 am

Confused wrote:I did report it as income. But instead of paying a tax rate based on the amount I made, they said I have to pay the rate based on how much my parents made because they claimed me as a dependent on their taxes. I just want to know if other people were told this or if this tax professional just doesn't know how to deal with the SMART income properly.

At least for me, my parents were unable to claim me on their taxes due to SMART and money I made last summer. I ended up having to file as a dependent, but we were able to find a student credit I could apply for, so I am getting almost all of my taxes back.

As far as I am aware, your tax rate should be independent of your parents even if you are a dependent.

by **Confused** » Thu Mar 08, 2012 11:30 am

I did report it as income. But instead of paying a tax rate based on the amount I made, they said I have to pay the rate based on how much my parents made because they claimed me as a dependent on their taxes. I just want to know if other people were told this or if this tax professional just doesn't know how to deal with the SMART income properly.

by **fish_** » Thu Mar 08, 2012 8:37 am

@confused, the way i see it, the money from SMART is like money from a job that doesn't take out taxes. regardless of what your parents do, you need to claim the SMART money as income.

by **Confused** » Wed Mar 07, 2012 7:22 pm

I was told that since I was claimed by my parents on their taxes as a dependent I have to pay taxes on my SMART income at their tax rate, which is of course a lot more. Has anyone else run into this or do I need to get another tax person to look this over?

by **handle2** » Fri Feb 17, 2012 11:45 am

Thanks. Much obliged. One of the beauties of going to school in Texas, no state income tax :-)

by **Guest** » Fri Feb 17, 2012 11:22 am

handle2 wrote:Can I ask if you used some sort of calculator to determine the quarterly filings?

I haven't done much research into it (I understand it isn't all that difficult), I just didn't know if someone could pass along a link or info they've found helpful.

Cheers!

For federal taxes, go to http://www.irs.gov/pub/irs-pdf/p505.pdf

This will take you through the form that determines whether or not you need to pay quarterly estimated taxes. Remember that the income from SMART is not subject to the self-employment tax. Also remember that you might have to go through a similar process for state taxes.

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