Taxation of Wages for U.S. Citizens and Residents
A student or scholar who performs services or produces a product in exchange for pay receives "compensation" for his or her work and is generally considered to be an employee of the university. This employee compensation may take the form of wages or salary (depending on permanency, level of employee benefits, job duties, etc.). Wage and salary payments, in the university context, can be broken down further into such categories as student employment, work-study, teaching assistantships, and others. All such payments are processed through Payroll Services.
Payments received in connection with the performance of past, present or future services by a student or scholar are taxable income, subject to federal, state and FICA tax withholding by the university. Federal and state income taxes are withheld throughout the year based on Form W-4, Employee's Withholding Allowance Certificate (PDF), completed by the student or scholar. The tax law provides for an exemption from FICA for students receiving payments who are also enrolled in and regularly attending classes at the university (also referred to as the "student FICA" exemption).
Payroll Services is responsible for printing and issuing checks on a biweekly basis (every two weeks) for most administrative and wage account employees and on a month-end basis for certain faculty members and graduate teaching/research assistants. Payroll Services is also responsible for making or recording certain deductions from paychecks for the purpose of issuing a "net check." The information necessary to make such deductions, however, may have originated within Payroll Services, University Human Resources Management & Development, Transportation & Parking Services, Student Account Services, the International Services Office, the Office of the Registrar, other campus departments, and/or governmental agencies. Deductions are generally based on information supplied by the employee via withholding forms, registration forms, immigration documents, etc. If deductions are misunderstood or incorrect, the appropriate office should be contacted, not necessarily Payroll Services.
Furthermore, Payroll Services is responsible for keeping a record of all the payments and deductions that were made to each employee during the year. Students and scholars should seek to understand the entries made on their paychecks and on their pay stubs and should verify their accuracy on a contemporaneous basis to avoid compounding the problems.
At the end of the year, the university reports the total of all payments involving services (from all GW departments, positions and semesters within the calendar year), along with any related income and employment taxes withheld, on Form W-2, Wage and Tax Statement. Form W-2 is provided to the student/scholar and the IRS. Students and scholars are required to report this income on their annual personal income tax returns.