Stipend | Meaning of stipend
Stipends and tax reporting
Despite not being a salary, a stipend is still regarded as taxable income by the U S. government. People who receive a stipend are not required to pay Medicare or Social Security taxes, but they must set aside a specific amount of money each month to cover their tax obligations.
The following format should be used to report the stipend on the tax return:
It is crucial to classify the stipend as taxable scholarship income for taxpayers who use tax software. The tax preparation software may also use other terms to categorize stipend income, such as:
As these represent different types of income and may subject you to excessive taxation, substitute 1099 income and substitute W-2 income should not be classified as stipend income.
What is a stipend?
A stipend is a set amount of money given on a regular basis to a service provider to help defray some of their expenses. They are frequently employed by staff to pay for extra business expenses or by interns who may not be paid and cannot afford the costs of transportation to their internship. This sum is typically paid on a weekly, biweekly, or monthly basis to cover necessities like housing, food, and transportation.
In contrast to a salary, a stipend does not pay for the services rendered or the number of hours worked. A stipend is used to assist with specific costs, whereas a salary is paid to an employee who is on a company’s payroll. The stipend allowance is typically set by the employer and is exempt from minimum wage requirements. Typically, employers will take into account other costs of living in their region and the stipend allowance. The type of training or work done may also be taken into account when determining the stipend’s amount.
Along with a stipend, some employers may also provide other benefits, such as:
Instead of actual employment, an intern’s position must emphasize education and on-the-job training in order for them to qualify for a stipend. Because the intern, not the employer or educational institution, will benefit from this training, the intern should not act as a replacement for regular staff and should not anticipate being entitled to employment once training is complete.
Types of stipends
Stipends are used by a variety of institutions and industries. The following are some of the most typical stipends given:
Church stipends
Priests who attend Mass outside of their regular duties are given a Mass Stipend by the Catholic Church. Because it is considered simony for a priest to demand payment for a sacrament, this type of stipend is seen as a gift.
Academic research
Similar to grants, stipends are payments made to individuals conducting research in a particular field. In this instance, a stipend may be provided by a third party, such as a company that may require the data, allowing unpaid research assistants to complete the work without being burdened by financial obligations. Scholarly articles, books, translations, digital publications, or site reports in the case of archeological digs are typically the types of research projects that a research assistant must work on to be eligible for a stipend.
Specific expenses
The funds provided for this kind of stipend can only be used for particular costs. For instance, a student might receive money as a stipend to purchase a laptop or tablet for use in their studies.
Health insurance
In addition to their regular salary, an employer might provide an employee with a health insurance stipend that could aid them in paying for health insurance.
Wellness programs
Additionally, as a part of a wellness program, an employer might provide additional funds to assist staff in covering the costs of wellness-related expenses like gym or yoga studio memberships.
Job training
Some employers give their staff stipends to help with job training. These stipends assist workers in financing additional training and courses that can advance their careers and their skill sets.
Volunteering
Although they are not frequently compensated for their services, volunteers may occasionally qualify for a stipend. One example of this is a volunteer going abroad to assist citizens of other nations. The stipend may pay for travel expenses, lodging, and meals, but it won’t pay for the volunteer’s services.
FAQ
What does it mean to be paid in stipend?
Key Takeaways. A stipend is a small sum of money given to students, interns, or trainees to help with living expenses while they are pursuing a career. Stipends are offered to individuals rather than a salary. Interns, apprentices, fellows, and clergy are common recipients of stipends.
What is the difference between stipend and pay?
Employees who receive salaries are paid through a company’s payroll, whereas those who receive stipends typically aren’t. Salaries are paid to cover specific costs. Unlike salaries, stipends sometimes include extra benefits like money for room and board.
Is a stipend considered income?
Stipends do not qualify as wages, so employers do not deduct Social Security or Medicare taxes from them. However, stipends are frequently regarded as taxable income, so as the earner, you should determine the amount of taxes that should be set aside. As a potential fringe benefit, some stipends may be taxable.
What is an example of stipend?
A stipend is defined as a sum of money received on a regular basis. A stipend is a small sum of money given by the institution to a graduate teaching assistant to help with living expenses. a set, recurring payment, such as an allowance or a salary for work done
