Hi @Hal_Al
I have a question. My son is an undergraduate student. He is getting an internship this summer through ORISE. He will be doing research sponsored by ORISE at an Air Force Base, but the paperwork clearly indicates he is not an employee and "You will be considered a program participant and will not enter into an employee/employer relationship with ORISE, ORAU, DOE, or any other office or agency." He will be getting paid a "stipend" of $2500/month. ORISE said the stipend is not a "wage" and they won't take out any taxes, provide a W-2, etc.
I am trying to figure out how to treat this "stipend" for tax purposes. The only words they use are "internship" and "stipend." I don't see anywhere where ORISE calls this a "fellowship" or "non qualified scholarship", but is that how I should treat this? If so, am I correct that this would be considered unearned income for purposes of the kiddie tax? Or, is this stipend considered something other than a fellowship which can be called earned income (and how would I report that if so)? He already is in the kiddie tax bracket thanks to a lot of interest income and scholarships above the cost of tuition, so whether or not it is considered unearned income will make a difference.
Additionally, since he has all of the interest income and scholarships, and since ORISE won't be withholding any taxes, it is very likely his taxes owed will be over $1,000. He hasn't been doing any quarterly payments so far, as his previous presumption was his summer employer would take out enough taxes to keep him below that $1,000 taxes owed threshold (which is what happened last year). Since that isn't the case this year, should he start making quarterly payments now based on his total tax from last year, and will there be some sort of penalty for not already doing so in April? In April, he wasn't anticipating owing more than $1,000 in taxes by the end of the year -- but now he is.
Thanks for any help! I'm including some language from the ORISE agreement if that helps with my first question above:
"All payments paid by ORISE directly to the Participant or on their behalf are considered taxable by the U.S. Federal government and should be reported annually. This includes stipend payments, .... and other payments to Participant. Stipend payments are not considered wages and should not be reported as such. Participants that will have no tax withheld by ORISE from their payments should consider filing Form 1040-ES on a quarterly basis and pay estimated Federal income taxes to avoid being out of compliance with Federal
regulations about the timeliness of tax payments. By accepting this appointment, the Participant agrees that they are NOT an employee of ORISE or ORAU. Therefore, the Participant understands and agrees that ORISE and ORAU will NOT treat participants as employees for income tax purposes. The Participant acknowledges their understanding and agreement that they are personally responsible for their individual tax preparation and payment."
