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Credit: Mo Riza

033: It’s Tax Season – Here’s What You Need to Know

You might believe that because you’re in grad school and receiving a research stipend, you don’t really need to worry about paying an income tax.  You don’t have a ‘real job’ and no one asked you to fill out any paperwork so you’re off the hook, right?

Wrong.  Utterly, expensively, illegally wrong.

Credit: Mo Riza
We get mall Santas at Christmas – why not an Uncle Sam on every corner during tax season?

The Tax Man Cometh

The truth is, graduate students and postdocs who receive paychecks, stipends, fellowships, grants, and any other type of pay are expected to pay income taxes.  Unfortunately, that’s not always made clear by your department.

This week on the show, we talk with Emily Roberts, PhD, about the special tax questions grad students and postdocs should be asking.  Emily earned her degree in Biomedical Engineering, but now spends her time helping trainees navigate the world of personal finance.

Emily explains that there are two broad categories of trainee income:

  1. Compensatory pay – this is money you receive for doing work, like research assistant, teaching assistant, or any other ‘real job’ you’ll have in your life.  You’ll get a W-2 form, and your employer will withhold taxes throughout the year.  This is how normal people do taxes.
  2. Non-compensatory pay – this is ‘awarded’ to you.  It might be a fellowship, scholarship, or training grant, but it’s not considered pay for performance.  And that can lead to a whole heap of side effects when it’s time to pay Uncle Sam.

Students and postdocs who receive non-compensatory pay may not have taxes withheld, and their department may not even let them know they’re required to pay taxes! They’re also not eligible for certain tax breaks.

What can you do?  Check out some of the following resources to learn more, and be sure to ask a tax professional for details on your own situation. That way, you won’t get a nasty surprise in year three of your training when an IRS auditor shows up at your door!

 

Heads I Win, Tails You Lose

Also in this episode, Josh takes his love of gaming to a whole new level by exploring the non-random outcome of a coin flip.  It turns out people are actually doing peer-reviewed research on coin flipping, including magician-turned-mathematician Professor Persi Diaconis!

And since we’re bemoaning the 16th Amendment to the US Constitution (income tax), we might as well celebrate the 21st (the repeal of prohibition!) with 21st Amendment Brewery’s Brew Free or Die IPA. It’s an excellent West-Coast IPA from the heart of San Francisco and you may be able to find it in your area.

 

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