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Scope
This procedure describes the process of completing the Fellowship Disclosure
Form. This form only needs to be completed for payments made as fellowships
through ISIS for amounts in excess of tuition and fees. This disclosure
form will need to be completed for postdoctoral fellows receiving fellowships,
as well as enrolled students by the individual responsible for approving
the fellowship. The form will be retained in the department and should
be completed for each academic year the individual receives a fellowship
payment.
Background
The Internal Revenue Service (IRS) is now extensively auditing universities,
and in some cases has assessed significant penalties to institutions
that are not in compliance with IRS regulations. One area that the IRS
is reviewing very carefully is the treatment of fellowship payments.
According to IRS guidelines, true fellowships cannot be granted on the
condition of receiving services. If the fellowship is granted on such
a condition, for example the teaching of a course, then the individual
is really an employee and payment must be made through the payroll system
and is subject to appropriate taxes and withholdings.
In response to these IRS reviews, we have developed a fellowship disclosure
form that will serve two purposes. First, it contains four questions
that are indicative of whether or not the fellowship is a true fellowship
according to IRS guidelines. This should assist you and your staff in
determining the appropriate payment method to be used. Second, the form
will document to the IRS that the department has reviewed the payment
to ensure it meets the test of a true fellowship.
System References [Top]
See the Fellowship
Disclosure Form/Questionnaire.
To view IRS Regulations concerning Scholarship/Fellowships see Topic
421 - Scholarship and Fellowship Grants on the Internal Revenue
Service Web site.
Policy [Top]
See University Policy IV.G.2 --"Taxation
Instructions for Foreign National Recipients of Scholarship/ Fellowships."
See University Policy VI.F.4 -- "Use of the
Payment Voucher and Demand Payments."
Responsibility [Top]
Prior to authorizing payments to a fellowship recipient, over and above
amounts for tuition and fees that are not paid through Payroll, the
department or school must complete this form for the recipient. The
University regards the payment of a fellowship stipend as proof that
the department has complied with this requirement.
This form should be completed each time a recipient receives a new
fellowship, and should be retained in the department for a period of
five years. The department or school may be liable for any penalties
resulting from an Internal Revenue Service (IRS) audit, if it has not
complied with this procedure.
Distribution [Top]
All departments that authorize payments to a fellowship recipient.
Ownership [Top]
The Director of Student Financial Services is responsible for ensuring
that this procedure is necessary, reflects actual practice, and supports
University policy.
Procedure Steps
[Top]
The Fellowship
Disclosure Form/Questionnaire contains the detailed instructions
for completing the form.
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