Tax Compliance

Tax

 

The mission of the Tax Department is to proactively research and guide the University in matters of international, federal, state, and local tax law. Additionally, the Tax Department provides best practices which ensure legal compliance and protect the tax exempt status of the University.

We are responsible for:

  • Researching international, federal, state, and local tax issues for the University.
  • Filing the University’s federal and state returns, including:
    • Form 990
    • Form 990-T
    • Form 1099-MISC 
    • NJ CRI-300R
    • NJ sales tax returns.
  • Reviewing the setup of non-resident aliens (NRA) individuals and entities in the Payroll and Accounts Payable Departments to allow for treaty benefits, ensure proper withholding, and tax reporting.

The Tax Department does NOT provide personal income tax advice to students or employees, nor does it issue Form W-2, Wage and Tax Statement. All Form W-2 questions should be directed to the Payroll Department. All Form 1098-T questions should be directed to the Bursar.

University departments should use sales tax exemption certificates whenever possible when purchasing services and tangible property for University purposes. In order for a purchase to be exempt from sales tax, it must be limited to University purposes and the payment must be made by a Stockton University employee with University funds (e.g., P Card or Stockton University Check). Purchases made with a personal credit card do not qualify for exemption from sales tax in New Jersey. Stockton University currently has sales tax exemptions in 2 jurisdictions: New Jersey and Florida. Sales tax forms can be found below:

  1. University NJ exemption declaration
  2. NJ ST-4
  3. State of NJ exemption letter - no expiration
  4. Florida
  5. Home Depot Tax Exempt Registration

University departments are required to collect and remit sales tax on sales or services and tangible property subject to sales tax. 

Visiting International Scholars

U.S. law significantly restricts what employment foreign nationals may accept. Before committing to an honorarium for a foreign national, departments must ensure the person has the appropriate visa that allows such a payment. For short-term visits made for the purpose of delivering a lecture or speech, only certain visa classifications are authorized to accept an honorarium. An individual already in the U.S. may not necessarily be here in the correct visa classification. For instance, diplomats, employees of foreign governments, military personnel, or others on foreign government representative visas, employees of the World Bank or political officers attached to a foreign embassy in the U.S. hold visa classifications specific to the duties of their posts and are not permitted to earn additional income through activities such as speaking engagements.

Do not assume that an international visitor holds the correct visa classification, especially if he or she is already in the U.S. You must look at additional sources of information that could include the individual's passport visa or stamped I-94 card to determine visa classification.

Click here to access the chart of most commonly used visa and payment eligibility.

Honorarium Payments to Foreign Nationals

Under the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA, section 431, it is now possible, if certain conditions are met, to pay honoraria to visiting scholars in B-1, B-2, or visa waiver (WB or WT status. An honorarium is a payment that can be of any dollar amount and is typically a fee paid to an international scholar/speaker who meets the following conditions:

  • The honorarium must be given for a usual academic activity or activities,
  • The visit to Stockton University campus is equal to or less than 9 days AND the international speaker/scholar to whom the honorarium is paid must not have accepted payment or expenses from more than 5 institutions or organizations in the previous 6 month period, and
  • Visitor is on a B or VWB - visa waiver (Canadian visitors - passport only).

For tax purposes an honorarium recipient is generally considered an independent contractor and their payments can be subject to a 30% tax withholding rate, unless the scholar/speaker qualifies for tax treaty benefits. There are several factors used to determine the taxability of these payments, such as, but not limited to, U.S. tax treaties with the visitor's country of residency, the 9/5/6 rule mentioned above, and the type of visa of the scholar/speaker.

The following is a list of information the Tax Department will need from the scholar/speaker to determine the correct taxation of the honorarium payment:

Submit all forms to the Tax Department within Administration and Finance, Fiscal Affairs.

 Letter of Invitation:

A letter of invitation must be sent to every foreign national invited to Stockton University who will receive a honorarium or reimbursement for travel expenses. The letter should come from the department that is sponsoring the activity. The letter should contain the following information:

  • Name of the event or activity.
  • Date and location of the event.
  • The amount of any honorarium that will be paid, if any.
  • Whether travel and/or incidental expenses will be reimbursed.
  • Contact information at the sponsoring department for further information.
  • Sample Invitation Letter

Usual Academic Affairs

Usual academic activities according to the proposed regulations has a broad definition which includes lecturing, teaching and sharing knowledge, master classes, readings, performances, and meeting of boards or committees that benefit the institution. There are limitations in place on the commercial nature of events such as performances. In order for an activity to be a usual academic activity, events must be open to students and/or the general public free of charge with no sale of general admission tickets.

Before entering into revenue generating agreements please contact the Tax Department for a review of the activity.

As a 501(c)(3) organization, Stockton University is generally exempt from income tax. However, under certain circumstances income it receives may result in income tax.

Generally, if the income received meets all three of the following criteria, it constitutes UBI:

  • It is income from trade or business,
  • Such trade or business is regularly carried on by the organization, and
  • The conduct of such trade or business is not substantially related (other than through the production of funds) to the organization's performance of its exempt functions.  

However, there are many exceptions and special circumstances that may cause a revenue stream to be deemed UBI or exempted from tax.

Please e-mail tax@stockton.edu with questions.

Prior to engaging the services of any individual as an independent contractor, the hiring department must complete the Independent Contractor Determination Checklist (ICDC).  The ICDC must be submitted to the tax office (Tax@stockton.edu)for review and approval. This form will be included with requisition and/or contract submissions to Procurement. If it is for an honorarium, please complete IRS Form W-9. If the individual is a foreign visitor, please complete IRS Form W-8 BEN.

The penalties for incorrectly classifying employees as independent contractors are significant. If a worker paid as independent contractor is reclassified by the IRS as an employee, the University will be liable for the amount of the federal income taxes it failed to withhold, together with both the employer's and employee's share of FICA taxes associated with that employee's compensation.

The IRS uses three characteristics to determine the relationship between businesses and workers: 

  1. Behavioral control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means.
  2. Financial control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
  3. Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

Full-time, salaried employees of the University who may be asked to serve as consultants for other University departments are not entitled to receive additional compensation for performing such services when those extra duties fall within their area of professional expertise. This is true even when the work is conducted during an employee's "own time" or outside of normal business hours. Such assignments are considered part of the job for which the employee is already compensated.

Students of the University receiving compensation must be paid through the payroll process.

If you have questions about this process, please e-mail tax@stockton.edu.

An honorarium is a gratuitous payment of money (or other thing of value), to an individual, for the individual’s participation in usual academic activity. An honorarium is provided as a token of appreciation for participation in an activity or event when no fee is legally required and not as a contractual obligation to pay for services rendered.

Usual Academic Activity:

Usual academic activity is defined as an activity conducted for the benefit of Stockton University, the honorarium-paying institution, which can include the following activities: lecturing, teaching, consulting, conducting research, attending meetings, symposia, seminars, readings, performances, or otherwise sharing knowledge.

Honorarium Conditions and Payment Processing For US Persons (US Citizen or US Resident):

Honorarium payments can only be paid to an individual, not a company or organization, for usual academic activity lasting no longer than 9 days.  There are no dollar limits in the amount given to individuals to determine if the payment is an honorarium. Follow Purchasing guidelines for the Guest Speaker Agreement Form.  Please include documentation from the event the individual participated in, such as a flyer or email invitation that was sent out announcing the event.

Honorarium payments represent taxable income for personal services (self-employment). Per tax regulations, Stockton University is required to report these payments to the Internal Revenue Service (IRS) on Form 1099-MISC if the sum of the annual payment(s) to the honoraria recipient total $600 or more during the calendar year.

Honorarium Payment Processing for Non-Resident Aliens (NRA’s):

The following documents must be collected from the honoraria recipient and submitted to the Controller’s Office/Tax Department prior to the time of service in order to authorize an honoraria payment for a non-resident alien. The documents must be sent to tax@stockton.edu.

  1. Letter of Invitation
  2. Honorarium Certification Statement
  3. Foreign Visitor Information Sheet
  4. Copy of I-94 (or I-94W if from a visa waiver country) and Visa
  5. If J-1 visa, Social Security number and Copy of the DS-2019 or IAP-66
  6. Exchange visitors (J-1 Visas) need authorization from the Office of Global Engagement which is sponsoring their Visa (For J-1 students, the authorization from the student’s sponsor must specify that the work is to be done under Academic Advising)
  7.  If B-1, B-2, VWB or VWT, Social Security number or Individual Taxpayer Identification number (if treaty benefits claimed). In order to access eligibility for treaty benefits applicant must request an appointment by emailing tax@stockton.edu.

The following documents must be submitted to the Controller’s Office/Purchasing Department:

  1. Completed Guest Speaker Agreement Form according to Purchasing procedures
  2. Completed, signed, and dated IRS Form W-8BEN- via email to Purchasing@stockton.edu

Honorarium payments to NRA’s can only be paid for an individual’s participation in usual academic activity. There are no dollar limits in the amount given to individuals to determine if this payment is an honorarium. Under U.S. immigration laws, no “B” visitors can perform work and/or be paid for non-employment compensation services outside the scope of the honorarium rules. Thus, honorarium payments for "B" visitors are not wages for services rendered (i.e. an artist comes to Stockton University to build a sculpture, thus creating a work product). That is beyond the scope of the honorarium rule if it is the work product itself that is sought, rather than a demonstration of the technique that produces the sculpture. This artist would need a work authorization in the U.S. to build the piece of art.

When analyzing potential honorarium payments, the payor (Stockton University) first needs to determine if standard immigration law or the special honorarium rules exception enacted by Congress covers the event and payment. Immigration law permits aliens with unrestricted work authorization to be self-employed and be compensated as such. This means that these individuals must be naturalized citizens, lawful permanent residents, or have Employment Authorization Cards in order to be paid an “honorarium” as compensation for such services.

The honorarium rules expand immigration law in only one way, the law allows international visitors to accept an honoraria payment as compensation for usual academic activity from universities and research institutions. In order for these specific honorarium rules to apply, the payee must be a visitor (an immigration law concept). The payor (Stockton University) must see evidence of visitor status in order to ensure that the rules are being followed. The honorarium rules do not require an SSN. A SSN is merely one type of ITIN that an honorarium payee may use for tax withholding and reporting purposes.

Honorarium Conditions for Non-Resident Aliens (NRA’s):

 If all of the following conditions are met, Stockton University can pay an honorarium to visiting International scholars in B-1, B-2, J-1, or Visa Waiver status (VWT, VWB).

  • The hnorarium must be given for a usual academic activity,
  • The honorarium must be given for services conducted for the benefit of the institution,
  • The activity or activities can last no longer than 9 days at a single institution, and
  • The international visitor, other than a J-1 visa holder, must not have accepted such payments from more than five institutions in the last 6-month period, and
  • International scholars with a J-1 visa must have a written authorization (email exchanges are acceptable as long as the authorization is explicit) from the school or research institution’s responsible officer administrating the J-1 exchange program.

Visa Restrictions

Non-resident aliens invited for the purpose of carrying on usual academic activities, incidental to the University’s normal academic functions, may enter the United States as a B-1 status (visitor for business), or VWB status (visitor for business- visa waiver).

Not all non-resident aliens are eligible to receive honoraria, due to immigration restrictions. Please consult with the Office of Global Engagement in advance of hosting a non-resident who is not in B-1, B-2, J-1 (Student or Non- student Visa), or VWB status.

  •  B-2s are not eligible for expense payments or reimbursements EXCEPT as incidental  to honorarium activities. If a B-2 has no honorarium-covered purpose, travel expenses are not permitted.
  •  In order to pay a J-1 visitor sponsored by another University, you must obtain written permission (email exchanges are acceptable as long as the authorization is explicit) from that school’s responsible officer. 

 Please Note:

  • All payments of honoraria to non-resident aliens who come to the University must be reported to the IRS on Form 1042-S.
  • All honoraria payments to non-resident aliens are taxable at a 30% rate, unless exempted by a tax treaty.
  • In order to claim a tax treaty exemption from tax withholding, the non-resident alien must be from a country that has a treaty with the United States. The applicant must request an appointment by emailing tax@stockton.edu in order to access eligibility.
  • To claim treaty benefits, J-1’s must have a Social Security number (SSN) or must apply for one at the local Social Security Office and they must have permission from the Office of Global Engagement that sponsored their IAP-66 or DS-2019.
  • If the visitor does not have an SSN or ITIN, prior to the request for payment, treaty benefits cannot be applied, and the payment shall be taxed at 30%.

Purpose

This best practice affirms and provides guidelines, in compliance with the Internal Revenue Service (IRS) Code and Regulations (see IRC § 274(m)(3) noted below), with regard to spousal travel and entertainment in conjunction with the President or any other authorized person as defined herein who is conducting business on behalf of the University.

Applicability

This best practice applies to the President and an executive as defined herein of Stockton University (including its subsidiaries and affiliated entities) who incur expenses for traveling and entertaining as part of conducting official business on behalf of the University.

Implementation

Implementation of this best practice is the responsibility of the administrative assistant of the executive.

Administrative Oversight

The administrative assistant of the executive is the Stockton University official responsible for the administration of this best practice.

Definitions

Executive: Any contractor, affiliate, trustee, or other individual acting in official capacity to carry out the business of the University.

Bona Fide Business Purpose: In order for spousal travel to not be taxable to the President or executive, the presence of the spouse must be essential (not just beneficial) to the University President or executive being able to carry out that individual's business purpose for the University. A determination of whether the President's or executive's spouse serves a bona fide business purpose as defined by the IRS will be based upon, among other factors, the following criteria:

  • The degree to which the "dominant purpose" of the travel is to aid the President's or executive's business purpose of promoting the University's objective.
  • The spouse's presence on the trip must be necessary, to effectively carry out the duties of the President or executive.
  • The extent to which the spouse's presence on the trip is to provide more than "incidental" business-related services to the University President or executive (e.g., socializing and attending luncheons/dinners, typing notes, or attending to ministerial or scheduling matters, etc. are considered incidental) for the duration of the travel.
  • The time spent by the spouse on personal activities in comparison to the activities related to the business of the University.

Based on current documentation from the IRS, the following purposes for spousal travel are not likely to be considered bona fide business purpose:

  • The spouse's performance of some incidental service or ministerial task or accompanying the President or executive to luncheons and dinners. The spouse must perform substantive business-related functions.
  • An expectation that the spouse will be present at related social functions or that their presence will promote goodwill with the other attendees.

Reimbursement: Payment to the President or an executive after the completion of the trip or entertainment, will be based on documented, reasonable, and actual business travel expenses supported by original, itemized receipts, or equivalent documentation.

Spouse: Refers to any individual who is lawfully married to the President or an executive under any state law.

Best Practice

The University will make the determination with regard to the business purpose and the essential presence of the spouse (not just beneficial) to the President or executive being able to carry out the business purpose for the University. Although the University may deem certain spousal travel to have an important business purpose, such travel may not be considered to have a bona fide business purpose to meet the requirements set by the IRS. In such cases, the expenses associated with spousal travel remain reimbursable; however, they will be treated as taxable income to the President or executive by the University per the IRS regulations. This taxable fringe benefit will be included on the President's or executive's W-2.

Procedures

To qualify for an exception, there must be a documented and bona fide business purpose directly benefiting the University and the presence of the spouse is essential to the University President or executive (Appendix I). Without completion of the Documentation Form for Spousal Expenses the value of the reimbursement will be added to the President's or executive's taxable earnings and the applicable taxes will be withheld from the President's or executive's paycheck.

To qualify for the exception under IRC 274(m)(3), spousal travel must be documented as meeting the requirements of the bona fide business purpose exception. Please see Appendix I for examples. To request consideration for the spousal expense exception please abide by the following process:

  1. The President or executive must complete the Documentation Form for Spousal Expenses. The requester must provide all details, including the proposed travel location, dates, and the estimated travel expenses; the business purpose of the attendee; duties performed by the spouse, in order to determine whether there is a bona fide business purpose for the travel of the spouse.
  2. The Documentation Form for Spousal Expenses is to be submitted for review and approval by the budget unit manager PRIOR to any expenses being reimbursed to determine if a valid bona fide business purpose exists to support NOT adding the expenses to the President’s or executive's taxable income. The completed and signed form should be sent via email to the Tax Department at Tax@stockton.edu. Please allow ten (10) business days for this part of the process.
  3. The form then requires final approval. Approval and/or rejection will be communicated to the President or executive.
  4. Approved bona fide business travel will be sent to Disbursement Services for reimbursement. Rejected bona fide business travel will be sent to Payroll for inclusion in the next pay cycle for the President or executive.

Appendix I: Taxes Related to the Expenses of the University President’s or Executive's Spouse

The Internal Revenue Service (IRS) requires a spouse to have a bona fide business purpose, business activity, and significant involvement with these business activities. Below are a few examples of the events that the spouse of a University President or executive (“Spouse”) may attend.

Fundraising Events

The Spouse may participate in a bona fide fund raising event; however, the spouse must demonstrate that there is a specific and significant involvement reason for the fundraising event. It is not sufficient for the spouse to merely state that attendance was required or presence was necessary.

An event that is not entirely a fundraising event, such as an athletic event, may be treated as a bona fide fundraising event if significant business activities occur, such as entertaining current or prospective donors, or hosting University guests and other dignitaries.

Additionally, the University may hold an athletic or alumni event at which the spouse is expected to participate in hosting.

The spouse will provide documentation reflecting the following information:

  • Names of donors at fundraising event,
  • Specific actions that the spouse performed for the fundraising event purpose, e.g., presentations or spoke with specific donors, and
  • Length of time at the fundraising.

Conferences, Seminars, and Conventions

The spouse may attend conferences with the University President or executive; however, mere presence or networking at conferences with other colleagues or partners will not justify a bona fide business purpose. Some conferences may offer educational programs for spouses of the University President or executive, attending such educational programs would be treated as a bona fide business activity and the spouse should provide sufficient documentation of registration and attendance.

When no such educational programs are offered to the spouse, the spouse must provide sufficient documentation of engaging in substantial business activities at the conference. Sufficient documentation may include a description of the business activity and an estimate of time spent on such activities during the conference.

Community Events

The spouse should provide the following documentation or records for community events:

  • Description of community event,
  • Specific business activities engaged at community event for promotion of the University, and
  • Length of time at community event.

Recruitment Events

The spouse’s participation in a dinner or other event, where the purpose is the recruitment of one or more potential University employees, is a legitimate business activity for which related expenses may be reimbursed; if the “significantly involved” standard is met. An event may be a bona fide “recruitment” event if recruitment is not the event’s primary purpose, so long as significant recruitment activities are conducted at the event.

It is not sufficient to simply attend the event. Rather, the spouse should provide written records showing:

  • The names of the persons being recruited,
  • A description of the manner in which the spouse participated in the recruitment of the persons, and
  • The length of time of the event and the approximate amount of time that the spouse spent at the event on specific recruitment discussions. At least 50% of the spouse’s time should be devoted to such.

Award Presentations

The University President or executive often receives awards and is required to travel to out-of-town locations where the award is presented. In these situations, the IRS presumption is that there is not a significant business purpose for the spouse to travel to the presentation with the President or executive; therefore, any travel expenses of the spouse related to the University President’s or executive's receipt of an award must be included in the President’s or executive's taxable income if the University provides reimbursement.

Personal Travel Expenses

If, in connection with any fundraising, recruitment, or other trip where the spouse is serving a bona fide business function, the spouse incurs personal travel expenses (for example, days when the spouse is not engaged in University-related business activities), the travel expenses related to the personal days shall not be charged to the University.

Internal Revenue Code Section 274(m)(3)

No deduction shall be allowed for travel expenses paid or incurred for a spouse accompanying the executive on business travel UNLESS:

  • the spouse is an employee of the taxpayer,
  • the travel of the spouse is for a bona fide business purpose, and
  • such expenses would otherwise be deductible by the spouse.

Internal Revenue Service Executive Compensation - Fringe Benefits Audit Techniques Guide (02-2005)

https://www.irs.gov/businesses/corporations/executive-compensation-fringe-benefits-audit-techniques-guide-02-2005

  • If the employer elects to treat the travel of the spouse as compensation and tax the executive accordingly, the employer can deduct the travel expenses (IRC § 274(e)(2)). The amounts must be reported in the executive’s W-2 as originally filed. The employer must also withhold taxes with respect to the amounts included in gross income (§1.132-5(t); 1.274-2(f)(2)(iii)). The limitations set out in §162(m) must be considered when spousal travel is included in an executive's compensation.
  • If an employer’s deduction under § 162(a) is disallowed by § 274(m)(3), the amount of the President’s working condition fringe benefit relating to the employer-provided travel is determined without regard to § 274(m)(3). However, to be excludable as a working condition fringe, the amount must otherwise be deductible under § 162 by the President if incurred by the President. The amount will be excludable as a working condition fringe if it can be shown that spouse’s presence has a bona fide business purpose and if the President satisfies the substantiation requirements under § 274(d). If the spouse’s travel is not excludable as a working condition fringe, then the President must include the value of the spouse’s travel in gross income. See Regulations §§ 1.132-5(t); 1.61-21(a)(4).

Employees can generally exclude the value of transportation benefits from their wages up to the following limits for 2021:

• $270 per month for combined commuter highway vehicle transportation and transit passes.

• $270 per month for qualified parking.

If the value of a benefit for any month is more than its limit, the amount over the limit minus any amount the employee paid for the benefitit will be included in the employee's wages.

For additional information go to, https://stockton.edu/human-resources/employee-benefits.html

Tuition Waiver FAQ

Why are there tax withholdings on my tuition waiver?

All graduate tuition and fee waivers are taxable unless, exempt under the Internal Revenue Service (IRS) Code. In compliance with IRS Code §127, $5,250 per calendar year (January to December) in tuition and service fee waivers associated with graduate assistantship (GA) appointments are excluded from taxable income. If the amount of the tuition and service fee waiver exceeds $5,250, the excess (the amount above $5,250) is deemed taxable income under IRS Code and taxed accordingly.

Is this a change in University policy?

No. Under federal tax law, a university employee who receives a graduate school tuition waiver in excess of $5,250 in a calendar year must treat the excess amount as additional taxable income (unless exempt as noted below). As a result, the University is required to withhold tax on the excess amount of the tuition waiver for graduate service assistants (GSAs) and report this amount on the W-2. However, tuition waivers for certain service assistantships may be tax exempt under IRS Code §132 and Treasury Regulation 162(a), which allows education benefits from employers to be tax exempt for certain courses of study.

Roles and Responsibility

University departments giving gifts to individuals are responsible for the proper reporting to the Payroll and Tax Department. Information regarding gifts is submitted via the Gift/Prize Documentation Form.

Administration

Gifts to Employees from Stockton University

Any cash or cash equivalents (e.g., gift certificates, gift cards) are required to be included in gross income regardless of the dollar amount. Gift certificates or gift cards are considered to be "cash equivalents" and are treated the same as gifts of cash per the Internal Revenue Service's "de minimis fringe benefits-Gift Certificates" regulation. The department must complete and have the employee sign the Gift/Prize Documentation Form. It should be submitted to the Payroll and Tax Department, which will include them as taxable items on the employee's Form W-2 along with a deduction of the applicable FICA amount. 

Gifts to Non-Employees

If Stockton University gives a gift to an individual who is not a Stockton employee and the gift is not in lieu of payment for services the individual has provided to the University, Stockton does not have reporting requirements to the IRS since gross income generally does not include the value of property acquired by a gift (I.R.C. § 102).

Approval

If you are unclear as to whether specific acts are covered by this policy or if you are unsure of the reporting, please e-mail the Tax Department at tax@stockton.edu.

Employer Provided Housing

The value of employer-provided housing is generally treated as income - meaning that the subsidized portion of the housing is taxable to the employee who receives the benefit - under the Internal Revenue Code (the "Code"). There are certain narrow circumstances in which the value of the subsidized portion of the employer-provided housing is appropriately excludable from income under the Code. Under the Code and applicable Treasury Regulations, an exclusion is warranted when (1) lodging is provided under circumstances that satisfy the "nontaxable lodging" provisions of Section 119(a) of the Code and Section 1.119-1 of the Treasury Regulations; or (2) lodging is provided under circumstances that satisfy the "qualified campus lodging" provisions in Section 119(d) of the Code.

Non-Taxable Lodging

Definition

Under Section 119(a) of the Code and Section 1.119-1 of the Treasury Regulations, the subsidized portion of the housing provided by the University is excludable from an employee's gross income if the following three criteria are met:

  1. Housing must be furnished for the convenience of the University,
  2. The housing must be on the University campus, and
  3. The employee must be required to live in University-owned housing as a condition of employment.

The three-part test creates a narrow exception, and the Internal Revenue Service has taken a conservative approach to the first and third criteria (relating to the "convenience of the employer" and "condition of employment"). Both the Tax Department and the Office of General Counsel must determine that these three criteria have been met prior to making such representations.

Substantiation

Except in unusual circumstances, the Payroll Department will not exclude the value of University-subsidized housing under the "nontaxable lodging" provision in the Code and implement regulations unless the following substantiation requirements are satisfied:

  • The residence must be on the University's campus. 
  • The written agreement must contain language indicating specifically that (i) the on-campus residence is provided for the convenience of Stockton University and (ii) the employee must accept housing on campus as condition of employment for job-related reasons that are explained in the written agreement. 
  • For certain positions when required in the employment agreement the employee must keep a log, notebook, or other form of contemporaneous written record showing that the residence is used for the discharge of job-related obligations: (i) the date and time; (ii) the nature of the meeting or function held at home or the telephone call received at home; (iii) the duration of the meeting, function, or call; (iv) in the case of a meeting or function, the number of people involved and the name of each person (if easily recordable); and (v) any other information supporting the job-related nature of the meeting, funtion, or call. The log should be retained and available for inspection for seven years.

Qualified Campus Lodging

Under Section 119(d) of the Code, which is specific to educational institutions, an employee avoids tax liability on the value of housing subsidized by the University if the annual rent he or she pays for University-owned housing is at least five percent of the appraised value of the residence he or she occupies. If the annual rent is less than five percent of the appraised value, then the difference must be reported to the IRS as taxable income. The University will use the current assessed value set forth in the records of the local municipality's tax office as the appraised value for each University-owned property.

An employee is eligible for the "qualified campus lodging" exclusion if the housing satisfies two criteria:

  • It is located on, or in the proximity of, either of the University's campuses. The Tax Department will deem the "proximity" requirement to be satisfied if the employee certifies that the housing is located no more than five minutes by automobile from the University campus, which is the employee's principal place of employment.
  • It is furnished to the employee and the employee's family for use as a residence. The Tax Department will view this criterion to be satisfied if the employment agreement or other pertinent documentation recites that housing is furnished to the employee and family for use as a residence.

General Implementing Rules

Except in unusual circumstances, the term of a lease for University-owned housing should be coextensive with the term of employment for a specific University job and should terminate no later than sixty days following cessation of that job.

Contact the University Tax Department if you have any questions about this policy or if you would like more information.

Meal Reimbursement for Overtime and Official Business Meals

Generally, meal expenses that do not involve an overnight stay are not reimbursable. The University may allow reimbursement if documentation supporting the reimbursement clearly establishes that the individual takes the meal during overtime work periods and for official business reasons. To be eligible for reimbursement, the University must consider such meals essential to its mission and a business necessity.

Overtime Meals

An overtime meal allowance is allowed when overtime worked is:

  • Essential to the Institution's mission,
  • Permitted under University policy,
  • Approved by appropriate authorized approver, and
  • In excess of the employee's normal, schedule work hours.

Stockton University’s policy regarding overtime meal allowance is to provide employees a meal reimbursement, if they work beyond the normal work day and perform at least 3 additional consecutive hours of work that are not otherwise compensated for at premium rates. The maximum rates are as follows: breakfast $7, lunch $10, and dinner $15. Please visit the Accounts Payable site for more information on Overtime Meals

 An overtime meal allowance is considered taxable wages and must be submitted to the Payroll Department for processing. 

Requests for meal reimbursements should be submitted to the Payroll Department (Payroll@stockton.edu) on a Meal Reimbursement Request. The payment will be processed through Payroll and will be included with the bi-weekly salary payment. This change is effective immediately. Hotel reimbursements will continue to be reported to the Accounts Payable Department via Chrome River. 

The types of payment to students fall into one of five categories: scholarships, compensation, reimbursements, prizes and awards or other. The following helps define each category:

I. Scholarships

  • Federal courts have consistently held that “scholarships” are relatively disinterested, “no-strings attached" educational grants, with no requirement of any substantial services from the recipients. Any amount paid or allowed to, or on behalf of, an individual to enable him/her to pursue studies or research primarily to further the student’s education and training and provided by the University for such purpose does not represent compensation or payment for services. Merely requiring the recipient to provide periodic progress reports to the University or the fact that the research or study results may provide an incidental benefit to the University is not enough to treat the payment as compensation for services. Such amounts are treated as scholarships, which are not subject to tax withholdings, but are reported as scholarships on IRS Form 1098-T.
  • A qualified scholarship is excluded from income tax. The IRS defines a qualified scholarship as a scholarship or fellowship grant used for qualified tuition and related expenses (I.R.C. § 117).
  • Amounts excluded from taxable income as qualified tuition and related expenses are limited to the amount used for tuition and fees, books, supplies, and equipment required for courses. These items must be required of all students in a course of instruction for the scholarship or fellowship grant to be tax-free (Prop. Treas. Reg. § 1.117-6(c)(2)).
  • Non-qualified education expenses include room, board, travel, the cost of optional fees, and personal expenses.
  • A scholarship is excluded from taxable income only if the student is a candidate for a degree at an eligible educational institution.
  • Any amounts received by a non-degree candidate are taxable scholarships/fellowships even if the amount pays for otherwise qualified educational expenses. Pursuant to IRS Notice 87-31, the payer of a taxable scholarship/fellowship is not required to withhold income tax and is not required to report the payment either to the student or the IRS.
  • Scholarships will be reported be reported by the University to the IRS and to the student on IRS Form 1098-T, Tuition statement.
  • Scholarships must be funded with allowable fund sources. 
  • Examples of scholarships include: 
    • A degree-seeking student is awarded an educational grant to cover the cost of tuition, fees, and other typical expenses of enrollment related to the student’s area of study.
    • A group of students travel as part of a student organization to a service learning activity. A select number of students (not all students or not all students uniformly) are eligible for financial assistance to defray some or all of the cost of participation. The financial assistance will be provided in the form of a scholarship and applied to the students’ accounts.
    • A group of students travel as part of a faculty led program. A select number of students (not all students or not all students uniformly) are eligible for financial assistance to defray some or all of the cost of participation. The financial assistance will be provided in the form of a scholarship and applied to the students’ accounts.
    • A group of students travel as part of a faculty led program or service learning opportunity. Rather than providing individual assistance to some students, assistance is used to defray the cost of the entire activity uniformly reducing the cost charged to each student. This programmatic level support is not a scholarship (or an award) to the individual students and is not subject to any student reporting.

II. Compensation

  • Payment for services performed by students primarily for the benefit of the University is considered taxable compensation. Payment for services is treated as taxable income, which is subject to tax withholding and is reported on IRS Form W-2.
  • This includes payments made for teaching, research, and/or other activities performed for the benefit of the University.
  • This includes student employees, graduate assistants, and work study students.

III. Reimbursement of University Business Expenses

  • Students who incur costs for approved activities that primarily benefit the University may be entitled to reimbursement of those expenses. As with University employees, this situation arises when a student purchases a service or good while acting as an “agent” of the of the University.
  • Reimbursement of University business expenses is not reportable as taxable income and is not subject to tax withholding.
  • All University policies and procedures apply to these reimbursements.
  • Examples of student reimbursements include the following:
    • Student A is approved to travel to Washington, DC to represent Stockton University in a scholastic competition.
    • Student B is approved to travel to a conference held in Memphis, TN to present a paper on behalf of the Department of Social Work.
    • Student C is approved to purchase a toner cartridge for a University-owned printer that is located in his department's lab.
    • Student D travels to Germany to perform research for the University, which happens to be the same topic related to her dissertation. The University would perform research on this topic regardless of the student performing research for her dissertation. The University is the primary beneficiary of this travel. 

IV. Prizes and Awards

  • Awards are amounts received primarily in recognition of charitable, scientific, educational, artistic, literary, civic achievement, or as the result of entering a contest. Recipients are selected based on their actions to enter a contest, competition or, proceeding. Drawing gifts or monetary payments are also classified as prizes.
  • Prizes and awards are not scholarships, compensation, or reimbursement of University business expenses.
  • Prizes and awards are includible in gross income (I.R.C. § 74 (a)).
  • Prizes and awards are reportable to the IRS and the student on IRS Form 1099-MISC, Miscellaneous Income.
  • Awards are generally funded using Foundation, institutional representation, or agency funds.
  • Examples of prizes and awards include:
    • Travel abroad assistance for expenses of trip for student traveling independent of a University course, program, or sponsored group. Types of expenses contemplated are transportation, lodging, meals, and the like where circumstances appear to not be a scholarship and activity is such that it does not appear to be a University business expense.
    • Assistance in emergent situations or situations of particular hardship where the purpose of the funding support student success but the nature of the expenses are personal.
    • Payments to defray costs for an educational experience, such as internships or conference attendance, where the types of expenses contemplated would not be categorized as a scholarship and the activity is such that it does not appear to be a University business expense.
    • Winning a prize at an art or scholastic competition.
    • Winning a random drawing for a gifts or gift card. (Note: restrictions relative to University and Foundation policies on gifts and gift cards.)
    • A student is awarded a travel grant to conduct research or attend a conference where they will present research related to their field of study but not on behalf of Stockton University. As the payment relates to the pursuit of studies or research and furthers the education and training of the recipient, the payment is considered taxable.
    • Funding provided via a stipend payment for a student to go on a summer or other internship, or to go on a job search/interview.

The following is general information about taxes for graduate students. It is NOT meant to represent advice. For specific questions about your tax responsibilities, please contact the Internal Revenue Service, an accountant, or an income tax service.

At the graduate level, all fellowship and assistantship stipends are considered taxable income by the Internal Revenue Service and by the State of New Jersey. Generally, fellowships do not have tax taken out at the time of payment. Students are expected to report the stipend and taxable income on their tax forms.

Graduate students may exclude from income monies spent for tuition and fees, books, supplies, and equipment required for courses. Tax treatment of specific items may change from year to year. It is important to visit the IRS website for the most recent regulations.

International students may or may not pay taxes on fellowship stipends depending on the specific provisions of the tax treaty between their home country and the United States. Please consult with a tax expert well in advance of the tax due date, which is generally on or around April 15.

Each student is responsible for determining how the tax law applies to his or her own situation. For more information about taxes and links to the Internal Revenue Service, Publication 970. https://www.irs.gov/pub/irs-pdf/p970.pdf

Graduate Assistant

A graduate assistant is a person who serves in a support role (assistantship) at a university, usually while completing post-graduate education. Assistantships provide experience for graduate students, increasing their future employment options.

Fellowship

A fellowship provides financial support to graduate students to pursue graduate studies without associated teaching or research responsibilities (as they are in a teaching or research assistantship). Fellowships are generally merit-based internal or external awards to support a student in a full-time course of study.

Graduate Assistant vs. Fellowship

Most graduate schools will offer both assistantships and fellowships to their students, but it is important to understand the key differences that distinguish these two often confused programs. First of all, fellowships are similar to scholarships in that they are granted to cover student costs, such as tuition, academic fees, housing, textbooks, and other essential supplies. Fellowships are generally sponsored by associations to provide money in exchange for short-term professional development opportunities lasting anywhere from a few months to a couple years in a specific field setting. On the other hand, graduate assistantships offer tuition coverage only for work completed on-campus like a work study program. Assistantships are also considered a salary and will not count as a financial aid award as fellowships do.

Stipend 

This term describes a living allowance and is generally taxable. In no instance is a stipend a payment involving services as it relates to work. Stipends include payments to the student or credits to a student’s account other than those defined as non-taxable fellowships. The credit results in the issuance of a check through Accounts Payable or Payroll. A courtesy letter will be issued to the recipient. The funds may be considered taxable income to the recipient, but are not reported as taxable income by the University on Forms W-2, 1098T, 1042-S (reporting for non-resident aliens, “NRAs”) or 1099-MISC. The University does not provide tax advice, the recipient should consult their tax professional.

Student Refund

This term is used to describe the processing of a payment to a student resulting from a credit balance on the student account. The term is also applied to the payment to the student for Title IV proceeds (SEOG, Pell Grants, and Federal Direct and Perkins loans) in excess of the amount of tuition and fees, room and board, and other authorized charges.

Compensation for Services Related to Work

This category is defined as payments made for teaching, research, and/or other activities performed for the benefit of the University, including activities for the University that may be associated with the student’s course of study and educational experience. Payments received in connection with the performance of service by a student are taxable income and may be subject to federal, state, and FICA tax withholding.

Graduate Assistant Housing

Under Section 119(a) of the Code and Section 1.119-1 of the Treasury Regulations, the subsidized portion of the housing provided by the University is excludable from an employee's gross income if the following three criteria are met:

  1. Housing must be furnished for the convenience of the University,
  2. The housing must be on the University campus, and
  3. The employee must be required to live in University-owned housing as a condition of employment.

The three-part test creates a narrow exception and the Internal Revenue Service has taken a conservative approach to the first and third criteria (relating to the "convenience of the employer" and "condition of employment"). The Tax Department must determine that these three criteria have been met prior to making such representations.

Substantiation

Except in unusual circumstances, the Payroll Department will not exclude the value of University-subsidized housing under the "nontaxable lodging" provision in the code and implement regulations unless the following substantiation requirements are satisfied:

  • The residence must be on the University's campus, 
  • The written agreement must contain language indicating specifically that (i) the on-campus residence is provided for the convenience of Stockton University and (ii) the employee must accept housing on campus as condition of employment for job-related reasons that are explained in the written agreement, and
  • For certain positions when required in the employment agreement the employee must keep a log, notebook, or other form of contemporaneous written record showing, for each instance in which the residence is used for the discharge of job-related obligations: (i) the date and time; (ii) the nature of the meeting or function held at home or the telephone call received at home; (iii) the duration of the meeting, function, or call; (iv) in the case of a meeting or function, the number of people involved and the name of each person (if easily recordable); and (v) any other information supporting the job-related nature of the meeting, funtion, or call. The log should be retained and available for inspection for seven years.

ASSUMPTION #1

Ed is an employee.

Under Section 119(a) of the Code and Section 1.119‐1 of the Treasury Regulations, the subsidized portion of the housing provided by the University is excludable from an employee’s gross income if the following three criteria are met:

  1. Housing must be furnished for the convenience of the University,
  2. The housing must be on the University campus, and
  3. The employee must be required to live in University‐owned housing as a condition of employment.

This three‐part test creates a narrow exception and the Internal Revenue Service has taken a conservative approach to the first and third criteria (relating to the “convenience of the employer” and “condition of employment”). Both the Tax Department and the Office of General counsel must determine that these three criteria have been met prior to making such representations.

An argument could be made that Ed is providing services to the University and therefore is an employee.  However, it is a stretch to say his arrangement meets the requirement for items 1 and 3, University Presidents/Executive Staff and RA’s only typically meet these two conditions.

Ed’s housing is taxable compensation.

ASSUMPTION #2

Ed is a student.

The types of payment to students fall into one of five categories: scholarships, compensation, reimbursements, prizes and awards, or other.

Amounts excluded from taxable income as qualified tuition and related expenses are limited to the amount used for tuition and fees, books, supplies, and equipment required for courses. These items must be required of all students in a course of instruction for the scholarship or fellowship grant to be tax-free (Prop. Treas. Reg. § 1.117-6(c)(2)).

Non-qualified education expenses include room, board, travel, the cost of optional fees and personal expenses.

No grey area.  Providing free housing to Ed is taxable income to Ed. The IRS does not require the University to report taxable non-qualified scholarships/fellowships on any reporting form (1098T; 1099 or W-2).  A courtesy letter is common practice among universities.  The courtesy letter informs the student of their responsibility to report the taxable income to the IRS when filing Form 1040.

ASSUMPTION #3

Ed is a volunteer.

Per IRS Publication 5137, Section 21 “Fringe Benefits for Volunteers."

Bona fide volunteers who perform services for a government entity are covered by the rules generally applied to employees for fringe benefits.

See Assumption #1 – Housing for Ed would be taxable income for Ed.

Lodging is excludable from wages of the employee if it is provided:

  • On the employer's business premises,
  • For the employer's convenience, and
  • As a condition of employment.

Federal law takes precedence over a state statute, or an employment or union contract, IRC §119.

 

Courtesy Letter Template

Student Gifts, Awards, and Prizes Procedure

Will you be hosting an event, meeting, or program where prizes will be given or a competition where someone will win a prize? If so, it is important that you follow the procedures outlined here and that you are aware of the policies associated with distributing prizes, before advertising, or purchasing the item for your event.

Please be sure to inform all individuals that the value of a prize awarded through a drawing or program is considered taxable income to the recipient and may need to be reported to the IRS.

Non-U.S. citizens may be subject to additional taxes. In some cases, 30% of the value of the prize must be withheld or paid before the prize can be claimed. Please contact the Controller's Office before awarding the prize if the recipient is a non-US citizen.

Gift Cards

Gift cards may be purchased, but it is not recommended.  Cash and gift cards are taxable awards reportable to the Internal Revenue Service, starting with the first dollar given.  Cash and gift card prizes given to University employees, TES employees, and student workers must be reported to Payroll for inclusion in their taxable earnings from the University.  Please adhere to the following guidelines:

  1. The total amount for any gift card cannot exceed $150.
  2. The recipient of the gift card must personally pick up the card by presenting a student ID, and completing the Prize, Award, Gift Receipt Form
  3. Notify Fiscal Affairs when a gift card has been awarded, by turning in the Prize, Award, Gift Receipt Form within five business days. *Contact the Tax Department before awarding the card if the recipient is a non-U.S. citizen.*
  4. If the gift card recipient is not affiliated with Stockton University, please complete Form W-9 and remit to Fiscal Affairs.
  5. Click here for Prizes and Awards guidelines.

**If the above policy is not followed, the individual that purchased the gift card on behalf of their department or organization will be documented as the recipient of the gift card and will be held responsible for any taxable income reported to the IRS.