Sunday, October 17, 2010
We reported below that some schools are paying stipends to recent law grads who haven't been able to find gainful employment. The popular blog Above the Law reminds us that those stipends are "income" for tax purposes and thus students need to establish a set-aside in order to pay their spring tax bills. Or in some cases, like the postgrad stipends paid by Georgetown, students need to consider whether their schools will withhold taxes upfront in order to properly budget for monthly living expenses:
Georgetown offered its 2010 grads a public interest fellowship option. If you worked for a public interest organization, full-time, for three months after graduation, GULC gave you $4,000.
But because the stipends were paid through the school payroll department which deducted taxes, students wound up with $2800, not the originally promised $4000. An unpleasant surprise for some if they didn't understand that up front.
If in doubt, ask your schools how the stipends will be paid and consult an accountant to determine how the stipends should be treated for tax purposes so you don't have any similarly unpleasant surprises on payday or taxday.
Read the full story at ATL, here.