Tax Determination Comparison
Comparison Tables
| Type | Scholarship or Fellowship | Award | Independent Contractor | Employee |
|---|---|---|---|---|
| Reporting | Not reportable | 1099‐Box 3 | 1099‐Box 7 | ‐2 |
| Taxation | Excluded from income to the extent there are qualified expenses | Taxable, no withholding | Taxable, no withholding | Taxable, withholding |
| Type | Scholarship or Fellowship | Award | Independent Contractor | Employee |
|---|---|---|---|---|
| Federal Tax | Yes, if not used on qualifying expenses | Yes | Yes | Yes |
| State Tax | Yes, if not used on qualifying expenses | Yes | Yes | Yes |
| Local Tax | No | Yes | Yes | Yes |
| Social Security Tax | No | No | Yes | No |
| Medicare Tax | No | No | Yes | Yes unless student exception applies |
| OPERS Contribution | No | No | No | Yes unless student exception applies |
| Worker's Compensation Insurance | No | No | No (contractor pays) | Yes ‐ estimated at .4% |
| Type | Scholarship or Fellowship | Award | Independent Contractor | Employee |
|---|---|---|---|---|
| Tuition, Books, Education Fees | Exclude from income if qualifying expenses, if expenses exceed scholarship income may be eligible for education credits or the education deduction | May be eligible for education credits or as a deduction from gross income | Usually not applicable | May be eligible for education credits or as a deduction from gross income |
Interest and Penalties for Improper Reporting
- Liable for payment of tax
Whether or not the tax was collected unless show income tax liability was paid (i.e. misclassified employee as I/C) - Failure to make timely deposits
.5% of unpaid tax for each month the payment is late up to a maximum of 25% - Interest
Determined based upon the federal short term rate plus 3% - Failure to file penalty
‐2's ‐ $50 per return; 1099's ‐ $100 per return
(Penalties can be abated with reasonable cause. Interest and withholding tax will not be abated.)