<p>I know she won’t owe anything, but it will cost more to do the return and file than she earned!!! Boo!!!</p>
<p>Wisteria, it does not make much sense to keep finding reasons to disagree. However, I believe that you will find little support of the notion that FICA is the sole responsibility of an employer. Each taxpayer is expected to file a correct and truthful return. No matter if the OP son worked as an independent contractor or an employee, he OWES a minimum of 7.65% in SE taxes. That is HIS obligation and not the employers. It is obvious that the employer is taking a position the summer hired guns are all temporary workers and, in a way, do not need to be reported as employees. I agree that this seems to be an incorrect position, but if they issued a 1099, the income better shows up in the correct row on the 1040. </p>
<p>For the record, I tried to ignore the SE taxes in two tax programs and both rejected this fictional return as incomplete. Again, I would tend to believe that the IRS is using programs to catch those type of simple erroneous entries (1099 and no SE report.) I read somewhere that reconciling 1099 to individual accounts and diminish the under reporting of income by self-employed was one of the IRS’s highest priorities.</p>
<p>I forgot to add something on the payment by universities for scholarship and fellowship income. This is one of the clearest explanations. Not surprise considering the small private school in MA must a monopoly on legal eagles and tax experts.</p>
<p>Taxes </p>
<p>The U.S. tax laws divide amounts received as scholarships or fellowships by Harvard students into two parts. Qualified scholarships or fellowships, which are amounts used, under the terms of the grant, to pay for tuition and fees required for enrollment, or for fees, books, supplies and equipment required for courses at Harvard, are nontaxable. Additional amounts, such as amounts provided for room and board or for travel expenses, are taxable. You can obtain additional information on the taxing and reporting of scholarships and fellowships in IRS Publication 970, entitled “Tax Benefits for Education,” in Section I, “Scholarships, Fellowships, Grants, and Tuition Reductions”. </p>
<p>**If any portion of a grant provided to you represents a payment for teaching, research or other services, that portion will be not be treated as discussed above, but will be considered compensation, subjected to state and Federal income tax withholding, and reported on a Form W-2. **</p>
<p><a href=“https://sfsportal.harvard.edu/admin/sro/stipend.shtml[/url]”>https://sfsportal.harvard.edu/admin/sro/stipend.shtml</a></p>
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<p>I agree that this is clear AND correct. Notice, however, that it does NOT say anything at all about whether the grants payments are subject to FICA taxes. FICA and income taxes are two different things.</p>
<p>The original poster and I have been in agreement all along that the income is subject to income tax–that has never been in question, so I’m not sure why you are quoting this here.</p>
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<p>First of all, let’s get the terminology clear here. He does NOT owe self-employment (SE) taxes, because he is NOT self-employed! The SE rate is not 7.65%, it is double that. There is no place on the SE form that allows one to pay 7.65% in SE taxes.</p>
<p>If he owes anything beyond income tax, he would owe the employee’s share of FICA, which is not the same thing as self-employment tax! But there’s no place on the 1040 to report “wage income which my employer knew about but forgot to withhold FICA on” and self-assess that 7.65% which an employer may have neglected to withhold.</p>
<p>Reporting the income on the SE form will lead the IRS to demand 15.3% of the income, not 7.65%.</p>
<p>The only place on the 1040 where you could self-assess a 7.65% rate in a way that the IRS computers could deal with would be on the line stemming from Form 4137, which is where employees are supposed to assess and pay their share of FICA on “unreported tip income.” That’s designed as a place where waiters and waitresses who didn’t report some of their tips to their employers can report those tips and pay their share of FICA on them. </p>
<p>The case of “unreported tips” is the ONLY case in which the tax law says that an employee is personally responsible for paying FICA to the IRS. That’s because it was the employee’s responsibility to report those tips to his employer and if he didn’t, then he has to deal with the FICA himself.</p>
<p>But that’s not the case here. This is not a case of an employee who didn’t report something to his employer. So the employee is not responsible to the IRS for FICA. The employer is responsible.</p>
<p>The IRS is aware that this is an issue for colleges and universities. The regulations and rulings have been changing and evolving and could well still be in flux. For all we know, the original university is in negotiations with the IRS over precisely this issue right now and is trying to get the matter straightened out on its end.</p>
<p>I agree with ellemenope–“Best to let sleeping dogs lie.”</p>
<p>Report the income on line 7 as wages, and if you like attach a clarifying annotation describing the fact that the employer did not issue a W-2 or 1099, and that there was no withholding. </p>
<p>The IRS then has the option to pursue the employer, if it is not doing so already, and get the matter straightened out definitively.</p>
<p>This is a very standard process–it comes up all the time, and not just with university employers. FICA taxes are called payroll taxes, and for good reason–the IRS accounting system is set up to deal with these remittances in a way that is organized by employer as a routine part of his payroll processing. Since the OP’s son did not get a W-2, he doesn’t even have the EIN (Employer ID Number) to make sure that any payment he might make gets credited toward’s the employer’s FICA remittance account. So if he pays the FICA and then later on, the IRS tries to straighten out the issue with the employer, they will not have any way of crediting a payment made by the OP’s son to the employer’s payroll tax account!</p>
<p>The proper remedy (if an error was made) is not to try and deal with this on the 1040.</p>
<p>If he wants to be entirely sure, he could always write a separate letter to the IRS, explaining the circumstances and asking them to look into whether the employer should have withheld the FICA and to let him know what he should do, but he shouldn’t just try to self-assess and remit his half (or both halves) of the FICA that should have been remitted by his employer.</p>
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<p>But for safety’s sake, I would file the return anyway, showing that the amount owed is $0.c<<</p>
<p>Heavens, don’t file a return for $50 which she made in MA (on which you owe no tax) unless there is a tax refund involved! Actually, don’t even file then. </p>
<p>My D had $4.63 withheld as state tax in MA on the $$ she made at her college job. She made less than the $2500 floor and so wasn’t required to file a return in MA. I told her that it wasn’t worth it for me to help her file in MA just for $5 refund. I would be happy to GIVE her the $$.</p>
<p>Can you imagine if every kid who made over $50 a year filed a return showing $0 taxes? The system would choke on all of the babysitters’ returns! Hey, that gives me an idea. . .</p>
<p>I think it is awesome how you parents work with your kids to get their financial and college stuff in order. They cannot go wrong with your support. I wish I had that. I am stuck figuring it out myself.</p>