Somewhat related to this issue is the recent ruling from IRS regarding the
FICA
tax exemption for students (a good overview can be found at
http://www.universitytax.com/studfica.htm, and the complete text of the IRS
ruling, "Revenue Procedure 98-16" can be found in PDF format in the
February 2,
1998 IRS Bulletin. Go to
http://www.irs.ustreas.gov/prod/ind_info/bullet.html
and select "Internal Revenue Bulletin 98-05 Weekly" in the scroll-list
window.)

Simply put, the IRS ruled that students employed by their colleges do not
have
to pay social security taxes if they are enrolled at least half time.

Molly Daniel, Grants Specialist
Sarah Bush Lincoln Health Center
Mattoon, IL

____________________Reply Separator____________________
Subject:    NSF REU student payment methods
Author: Research Administration Discussion Group
<xxxxxx@health.state.ny.us>
Date:       3/3/98 3:08 PM

NAU typically pays all students such as this through the payroll process.
I believe either way is allowable and probably OK from an administrative
perspective.  However, both stipends and wages are taxable to the student.
The student may not be aware of tax requirements and may not budget their
own resources accordingly.  As a result, the student may not have the funds
available at "tax time" to pay any amount which might be due.  Therefore,
we look at the payroll system as one more way to assist students rather
than as a needless intervention into their personal affairs.  Terry-

Terry A. May, Ph.D.                       Voice:    520-523-6788
  Director of Research Administration     FAX:      520-523-1075
  Office of Grant & Contract Services     INTERNET: xxxxxx@nau.edu
  100 Babbitt Admin. Ctr., Box 4130
  Northern Arizona University
  Flagstaff, AZ  86011-4130