Discussion:"stipend" for intern
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Discussion Forum Index --> Tax Questions --> "stipend" for intern
| 24 January 2008 | |
| Client had a foreign student (no work visa)doing an unpaid internship several days per week at her business. She paid a "housing stipend" to the student. What is the proper treatment of such a payment? | |
Death&Taxes (talk|edits) said: | 24 January 2008 |
| If the student is 12th grade or below, they could qualify as an exchange student and your client could get a $50 a month charitable deduction....see Publication 526. Somehow your situation sounds different. | |
| 24 January 2008 | |
| Under the rules of most internship programmes, they cannot be paid. Instead, people offer small stipends to cover expenses while on the job. Interns are not legally employees, they are legally classified as students and the "job" is a graded assignment. The intern actually pays the school for the privilege to work for you. If they do a bad job, you can fail them and they have to re-take the course (hopefully with someone else).
There is no IRS code sections specifically dealing with these stipends, so the methodology used to report the income is not necessarily the same for every tax preparer whom you might ask. Here's the one I use: These stipends should be reported on a 1099-Misc as NonEmployee Compensation. Technically, you should have withheld 30% if no ITIN or W8-ECI was supplied to you. In practice, you can get the student to send you a W8-ECI after the fact. If the student was from a country that has a tax treaty with the US, the income may be exempt. Otherwise, the student files a 1040NR or 1040 (depending on treaties and length of stay in the US) and lumps this income with other scholarship income and can then deduct from the income the costs of the tuition paid to study underneath you. | |
