Discussion:Self-employment tax for Fellowship
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| Revision as of 13:27, 28 October 2009 LH2004 (Talk | contribs) (Since the real q) ← Previous diff |
Revision as of 13:30, 28 October 2009 Smokeytax (Talk | contribs) (To digress a bit) Next diff → |
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| {{ForumReplyPost|UserID=LH2004|Date=October 28, 2009|Text=Since the real quid pro quo is services to be provided later for the sponsoring employer, which are merely delayed, it sounds more like a signing bonus subject to ordinary employment tax.}} | {{ForumReplyPost|UserID=LH2004|Date=October 28, 2009|Text=Since the real quid pro quo is services to be provided later for the sponsoring employer, which are merely delayed, it sounds more like a signing bonus subject to ordinary employment tax.}} | ||
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| + | {{ForumReplyPost|UserID=Smokeytax|Date=28 October 2009|Text=To digress a bit - I heard a very interesting tale about a Chicago law school (don't know which one) - NONE of its' spring 2009 graduates got a job, so the school made a deal with one of the organizations that offer low cost legal services to the poor to employ the graduates. I believe money changed hands. The motivation for the law school was to keep its job statistics in good standing. | ||
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| + | Interesting . . . }} | ||
Revision as of 13:30, 28 October 2009
Discussion Forum Index --> Advanced Tax Questions --> Self-employment tax for Fellowship
Discussion Forum Index --> Tax Questions --> Self-employment tax for Fellowship
Polohippee (talk|edits) said: | 27 October 2009 |
| I had a recent law grad come into my office today to ask a question that I have not dealt with before. Although she recently graduated from law school with an offer from a large firm, she has been deferred from the firm for one year. In the interim, the firm has provided her with a "public interest fellowship". In exchange for a monthly stipend payment paid by the firm, she will work in a public interest job of her choice. She is not on the firm's payroll, so no withholding is taken. Beyond ensuring that she is working for a public-interest organization, the firm exercises no control or supervisory function. She anticipates receiving a 1099 for this income. Although it is clear that this is taxable income, is she subject to self-employment tax?
This seems like a different situation from the usual fellowship situation, where an organization gives a stipend to a non-degree-seeking, but academic, individual to finance his research without exerting any control or responsibility over the research. My main concern arises from the fact that this is not an academic context. Spiegelman v. Commissioner, 102 T.C. 394 (1994) seems to provide some guidance, holding that "the funds....were not provided to petitioner as compensation for research services, and petitioner's efforts did not economically benefit Columbia University. Petitioner performed his research and studies primarily to further his own education and training, and the fellowship grant was bestowed upon him in recognition of and in furtheranece of his pursuit of academic excellence." Has anyone else dealt with this or a similar situation? | |
| 28 October 2009 | |
| Since services are required in this instance, it does appear that SE tax would apply here. | |
| 28 October 2009 | |
| This seems very analogous to the fellowship in education. The idea is to broaden her horizons so to speak. I don't think the facts exactly have to match.
Riley posted around the same time I did, and it's wise to defer to him. However, I would reread that education case. Weren't the academic individuals also required to do research? If so, one could reason that that is no different from this lady being required to seek a public interest position. | |
| 28 October 2009 | |
| Reading from the headnotes from the Spiegelman case:
P applied for, and was awarded, a post-doctoral fellowship grant from Columbia University, which allowed him to pursue independent research. The terms of the fellowship did not require P to perform any services, and they did not otherwise contain a quid pro quo. Held, the fellowship grant is not income derived by P from a trade or business, and he is not subject to self-employment income tax on that amount. http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl522c/10/doc | |
| October 28, 2009 | |
| Since the real quid pro quo is services to be provided later for the sponsoring employer, which are merely delayed, it sounds more like a signing bonus subject to ordinary employment tax. | |
| 28 October 2009 | |
| To digress a bit - I heard a very interesting tale about a Chicago law school (don't know which one) - NONE of its' spring 2009 graduates got a job, so the school made a deal with one of the organizations that offer low cost legal services to the poor to employ the graduates. I believe money changed hands. The motivation for the law school was to keep its job statistics in good standing.
Interesting . . . | |
