CandleFocus Glossary Editor
A stipend is a form of compensation given in lieu of, or in addition to, wages or salary. It is usually paid out to individuals who are conducting career-related training, such as interns, apprentices, fellows, and clergy.
In most cases, stipends are considered taxable income with the Internal Revenue Service (IRS), meaning that recipients will have to pay taxes based on the stipend amount. The stipend issuer may deduct the amount due in taxes (often referred to as withholding taxes) from the stipend amount; if not deducted, recipients may have to pay taxes on their own directly to the IRS. The amount paid in taxes may vary depending on the person’s filing status and other factors.
As stipends may often fall below the minimum wage, the US Department of Labor has set up guidelines on how and when stipends can be paid. In general, the department requires that all stipends are paid for a “good purpose”, meaning that it is for a purpose that is “in the long-term interest of the recipient” in terms of the career training received.
It is important to note that not all stipends are considered income by the government. For certain stipends, such as fellowships, the money paid can be categorized as a scholarship and may be exempt from taxation.
It’s always recommended to review all stipend information carefully, as the terms and requirements can vary from one stipend recipient to the next. Those receiving stipends should also keep good records of the money received, including any agreements or contracts that were signed when the stipend was first offered. This is to ensure that federal income taxes are handled properly and that stipend recipients are aware of all of their rights and responsibilities.
In most cases, stipends are considered taxable income with the Internal Revenue Service (IRS), meaning that recipients will have to pay taxes based on the stipend amount. The stipend issuer may deduct the amount due in taxes (often referred to as withholding taxes) from the stipend amount; if not deducted, recipients may have to pay taxes on their own directly to the IRS. The amount paid in taxes may vary depending on the person’s filing status and other factors.
As stipends may often fall below the minimum wage, the US Department of Labor has set up guidelines on how and when stipends can be paid. In general, the department requires that all stipends are paid for a “good purpose”, meaning that it is for a purpose that is “in the long-term interest of the recipient” in terms of the career training received.
It is important to note that not all stipends are considered income by the government. For certain stipends, such as fellowships, the money paid can be categorized as a scholarship and may be exempt from taxation.
It’s always recommended to review all stipend information carefully, as the terms and requirements can vary from one stipend recipient to the next. Those receiving stipends should also keep good records of the money received, including any agreements or contracts that were signed when the stipend was first offered. This is to ensure that federal income taxes are handled properly and that stipend recipients are aware of all of their rights and responsibilities.