Filing Taxes for Graduate Students 2026-2027

Paul, thank you. I appreciate that. Uh, as Paul mentioned, uh, my name is Ed Jennings. I'm the tax director at the University of Michigan. Um, and have been doing this for 26 years and enjoying it very much. I really, uh, uh, appreciate the opportunity to get in front of students. I really do, and I find every year you surprise me that much more as to how you pick up taxes. So, don't be shy, and feel free to ask questions as we go through. Um and I do want to say welcome. Um today's uh discussion is tax workshop. Um and really what we're going to talk about is the taxation of scholarships and fellowships and how best to report them on your tax return. uh as an overview uh you know the issue this is for most students um and you'll we'll talk about that as we go but there are certain significant tax uh burdens that you're going to pick up uh as we go through this and it's requiring you to identify your tax quantify your tax which may include paying quarterly estimated tax payments you may also need to file uh multiple state tax returns so we'll talk about this as we go through uh the session We have some case studies for you. If I may, as a qualifi qualifying statement, I unfortunately uh as the university tax director, I'm not allowed to to provide personal tax advice to individuals. That includes uh interim president Graasso uh for insurance and risk reasons. That said, I'm able to respond to any questions that you have during and immediately following the presentation. Um that said, afterwards, I won't be able to answer your questions. So if you have them speak them, speak them now. Um uh and and of course the reason is this session is viewed as educational which I'm allowed to provide but afterwards it's viewed as consulting which I'm not and again for insurance and risk reasons. So here's the agenda. Uh and one thing I want to say as an overarching statement is during our discussion we're going to make a distinction between a class or two classifications. There's US citizens and permanent residents over here and then there's non-resident aliens over here and uh that's all defined by the code and that's important because a lot of the tax consequences differ depending upon which classification you fall into and it will impact how you identify quantify and then report and pay your taxes. So it's something to keep in mind. So with the agenda what we have is you know just basic questions and that's really what tax is. What's taxable income for federal tax purposes? Um, how is the how how basically how are taxes paid is a general rule and there are certain forms we'll talk about. Then there's questions you're going to want to ask. How do I file my tax returns for the for the coming year uh with the IRS and again we're talking federal taxes. So you're talking IRS internal revenue service and there are certain uh deductions and threshold issues we'll talk about and we'll go through some case studies on income tax returns. Then it's how do I pay and file my quarterly estimated tax payments? And that's where it gets interesting and again this is where that distinction comes in between US citizens and permanent residents and those uh non-resident aliens again as defined by the code. Um and then you may have a situation where you have to file a state tax return and you may have to file multiple state tax returns. So we'll go through this as with a case study to leave you with some comfort as to how to work this. And again, as Paul mentioned, it's taped or recorded. So, this will be very good to go back and refresh uh refresh whatever questions you have. At the very end of the presentation, we have some IRS publications, and a lot of what we're going to show you comes from those IRS publications. So, it's a resource, so it's something to use as you go forward. Um, do keep in mind whenever you deal with an IRS publication, it's written in favor of the IRS. So, you may say, "I thought we could do this." Well, you probably can. uh the IRS just may not mention it because it's not favorable to them. So, it is the one party providing you instructions on how it's best for them to make as much money as they can from you. That said, um there are other resources as well. Master Tax Guide, uh a few other even your Turboax software. Uh so there's re certain resources, but if I may, the best resource are each other. um you really have basically the same s scenario and everybody's going to have just enough of a different fact pattern to be able to understand what the other person does and how you're doing what you're doing as opposed to what they're doing and it makes a really good metric uh if they're doing certain things and you can learn from them. So again there's software there's outside other books outside of these publications but more importantly I think you're going to find uh where the real benefit comes is in uh each other the network you can build. So this slide, I like this slide. This slide is about federal tax purposes, uh, federal income tax, and it has the general concepts of how taxes work all on the one slide. First, your authority is the Internal Revenue Code. Generally, one source. Now, there's a lot of pronouncements and treasury rags that support the Internal Revenue Code, and there's IRS pronouncements, rev rulings, and so forth and so on, but we're talking generally about the Internal Revenue Code, and that's what Congress actually is responsible for. they pass provisions and so forth and that's how it works. And the interesting thing about the IRC or the code is that it really subjects you to taxes on an annual basis on your net income. And we'll see through examples exactly what that means. It broadly defines every term. So taxpayers is everyone individuals, trusts, estates, corporations, even the University of Michigan is an income taxpayer. Uh it's just on what we call unrelated business taxable income. It's a much smaller amount than what our income is. It doesn't include tuition. It doesn't include um uh patient fees, but um basically uh we do pay and do have income tax. Income, income is broadly defined as accretion of wealth. They would tax happiness if they could figure [clears throat] a way to do it. So, it's very broadly defined. Uh wages, interest, dividends, cap gain, rent income. There's also when you go to do your tax return another concept here and it's called uh Sika or FICA and basically it's self-employment tax. FICA is also the the share of self-employment and it's on your earned income your wages. It won't be on your scholarship uh revenues and we'll talk about that but basically another level of tax. It's a 15.3% flat rate. Um we we'll mention it as we go through but it shouldn't be applicable. So, we're really talking about income tax as we go through, not to be confused with FICA. Um, now something to keep in mind is the taxes are based on a graduate a graduated tax rate or progressive rate. And we'll have examples and walk you through that. Um, those taxes are often often tied to your filing status. You can be single, you can be married, you can be married filing jointly or married filing separately. Uh, you can also be ahead of household. So, they have various classifications and you have to know where who you are and what which one you fit in. Um, they also have tax returns and they're filed on a calendar year for most individuals. Uh, same with partnerships on a on many cases. Um, and it's a 12 month period or less. Some people like to make it, oh, we'll just make it a 13-month year. You cannot. Um, it's also on a cash basis. So, someone was going to pay you in December 31st and they didn't get to it until January 2nd, it falls into the next period. And it's something to keep in mind. Very important when you're talking about certain scholarship payments that are subject to taxable income in which quarter it falls into. Um, uh, there's also a concept on worldwide income. So if you're a US citizen or a permanent resident, now a permanent resident is a foreign born person who has been in the US long enough to be a considered a US resident. Not necessarily advantageous because what happens is as a US citizen or permanent resident, you're taxed on your worldwide income. So you go over to Ireland and you sell some art, um you're going to have to pay tax to the IRS on the art you sold in Ireland. And yes, you have to pay tax to Ireland as well. Um, now we have a foreign tax credit. So, it's in a sense it's trying to work out where you don't have to be double taxed. There's also income tax treaties that try to avoid duplicate taxes as well. But the bottom line is you're going to be taxed on your worldwide income. NAS, non-residentalians, you get comfortable with this. That's not the case. And we'll talk some about that as we go through. And the last concept is something that is very interesting. And this brings up quarterly estimated tax payments. It's pay as you go. You know, a lot of times people think, well, uh, it's the 25 year. I don't have to file my taxes till April 26. I don't have to pay them until April 25 26. No, you have to pay your taxes as you go. Uh, and your employer withholds taxes from you as you earn your wages. Uh, and this is something to keep in mind. This is why you have to pay in taxes quarterly even when you're going to file them file the tax return next April of the of or April of the following year. So these are the concepts we're going to talk about. You'll hear them in the case studies. We'll review them again when we get to the state income tax returns. Progressive tax rate. Well, here we are. This is what it looks like. First, you have to find your classification. Single, married, head household. And then of course the percentage. The less money you make, the lower you will be taxed. The lower the tax rate, the income tax rate. Um, and 37% you can see people are doing pretty well at $640,000 6601 or more. It's that's how it works. Um, now that's for current year 2026. What I want you to keep in mind is right now midway through the year, the IRS hasn't really come up with a lot of tax information or forms for the 2026 year. So, you'll see a lot of examples. we have a we have to show you based on the 25 year uh that's unfortunate but the concepts are the same so we're not able to update the forms we don't have them but we do have basically the concepts will carry forward and we'll note that to you as we go through so we're talking about income tax and taxable income so are scholarships and fellowships taxable income and then if so you know how do we if it's taxable how do we pay them and uh how does it work so is As a general rule, uh, anything that you receive increasing your wealth is taxable income. And that's true with scholarships and fellowships unless they meet the definition of qualified scholarships. So qualified scholarships are not subject to taxable income. That's really going to be um in a scenario when you're a a recipient. We like to call them students. You're for a candidate for a degree. Um and you're basically being uh pursuing the uh uh study or or the field of education. You're not working for the individual the employer who's paying you. You're actually just in the pursuit of education and uh you're being paid by an accredited educational institution. So basically, uh, tuition, uh, tuition is something that if you had to, if that's being waved, um, that could be taxable income. Someone's paying your tax or pay paying your tuition for you. But in this case, because it's what we want you to do, which is have a a study, uh, an independent study, that's not going to be subject to taxable income, and that's how it works. So uh it could also include uh expenses uh for things like books and so forth that are required as part of the curriculum. So in my day you used to have a syllabus and it said books required books recommended or the books required would be qualified. The books recommended would be not qualified. Um one taxable when when the other not. So that's how the tax comes up. Someone's paying an expense on your behalf. That's a benefit you're receiving. that's an accretion of wealth that's taxable. Um, and then you have a situation where it can be excluded if it's for educational purposes. And that's how we look at it. Non-qualified, that's going to be a um qual a scholarship payment uh often defined or called a stipen. There's no real definition of the code for it, but it's for paying rent, buying food, anything else. More on the personal side of things that triggers taxation. All right. And then at the very bottom I do mention the FICA and self-employment again and generally the scholarships are excluded. The reason is the FICA and the self-employment tax are on earned wages. Well, if you're pursuing education, you're not earning. You're not working for someone. You're working for yourself for your own educational benefit. So, for that reason, it shouldn't apply. And that's very important because every once in a while the IRS usually have the Philadelphia office will send notices to you saying you didn't pay your FICA on your on your scholarship and and that's a problem and you want to be able to respond by saying well you know from what I understood I didn't have to pay it and they'll they'll basically say they're sorry and bury bury that notice. So now we're moving on to how is the tax paid regarding taxable income. So basically, okay, I got taxable income, fine, and I've identified it. I've quantified it. How do I get the payment to you? Um, and and you know, how does that work? Well, so we have a W2, and that's a wage statement. So an employer basically has to withhold taxes on your wages as you earn them. And that's the concept we were talking about earlier. Um, and they'll do that throughout the year. So basically the employer, if you're an employee, will identify your taxable income, quantify your taxable income, and then withhold that amount, send it to the IRS on your behalf. You don't have to do anything. Uh, and that's the good news. Um, you just have to reconcile that when you go to file your income tax return of April the next year. Just attach the N2, explain how it works, and so on. Hopefully, the amount they've withheld covers your taxes so you don't owe anything. Uh, and that's the idea. Uh, we call that intoxication. That's where you get real excited about a refund until you realize it was your money to begin with. That's the idea. Now, a 1042s, that's a form specific to non-resident aliens. And again, non-resident aliens are foreignb born individuals who have not been here in the US long enough to become a permanent resident. Um, the 1042s, again, an employer will pay it to you. Not in the ambit of an employee. uh it would be in the ambit of a let's say a student receiving a scholarship um and then that would be subject to withholding um and they withhold at a 14% rate um and it could be a smaller rate uh depending on the treaty um there is a higher rate but generally that doesn't apply to students so that shouldn't be an issue but the point there is they're identifying quantifying withholding the payment and paying it on your behalf again life is good now then there's the 1099 9. That would be for US citizens and permanent residents. Um, and what in that case, if you get a 1099, they're quantifying or identifying and quantifying your taxable income, but they are not going to withhold. You still have to make a payment. Well, the irony here is that with students who are US citizens and permanent residents, you're not even going to get a 1099. Back in 1986, higher ed, they changed the law and we higher ed started to have to tax scholarship income, even what is now the non-qualified. Well, at that time, everybody said, "Oh, boy. Well, uh, do we put it on a 1099?" And higher ed said, "We can't do that to our students. Uh, we're not really able to be able to do that. That would cause us a lot of problems." So, for whatever reason, the Treasury regulations gave us an exception. So, you will not get a tax form. If you're a you're a a gsi, a gsrra, you'll get a W2 because you're an employee. And that's even if you get waved tuition, you will still get uh a um a W2. And if you're a non-resident alien getting any kind of stipen payment that's a non-qualified uh payment, you're going to end up with a a form. But if you're a uh US citizen or permanent resident and you have a scholarship uh and you're not an employee, you're not going to get a 1099. No one's going to tell you you have a tax a tax issue. That's your burden. And that's the distinction between the two classes, the uh US citizen permanent resident versus the non-resident alien. And the higher burden is on the US citizen permanent resident. Now you have to be able to identify and quantify and then you have to determine what the amount is that you have to pay in on a quarterly basis and you have to make that payment. It's your burden and that's basically that's basically what really what the impetus of this presentation is about. Um so for the next couple slides we're just going to talk about NAS. So basically, again, NASA's are uh foreign individuals who haven't been here in the US long enough to be uh permanent residents. And a permanent resident, you'd know they have a green card or they're here long enough. Typically, it's 183 days in in a year. Well, a lot of times a student is uh you're here more than half the year. Uh but in in with students many times the treaty overrides the treaty does override the state the IRC the internal government code and does actually ex extend the period. So it could be a five-year period or even longer that you're going to be an NRA. So based on the treaty you're going to be here a lot longer than the substantial presence test in the internal revenue code. Uh and it can also be through things like marriage and stuff like that. What's interesting is as as an NRA, you're only subject to tax on your US sourced income. So again, you go over to Ireland, you sell art, make money, you're going to pay tax to Ireland, but you don't have to owe anything to the US. You're a foreignb born person who has no contact with the US. You're not under their jurisdiction, and you didn't make any of the money in the US. Now, scholarships that you're receiving to attend the University of Michigan would be US sourced income. So, you will be taxed on your scholarships. Now, payroll um uh the um you our payroll office will report um on the 10402s the non-qualified payments and withhold on them. They will not report the qualified payments and as mentioned the rate is at 14%. And of course, we mentioned treaties. Treaties help very much. And when you work with payroll, they will work with you to make sure that you have the least amount withheld and possibly no withholding. So if you get a 1042s and you have any questions, you now unlike me where I can't answer your tax questions, um, payroll can basically based on the form that you bring forward. If they give you a form, you can call payroll and go, I got a 10402s. What is this? How's this work? Uh, is this correct? they have to answer that question for those questions because they put it on a form for you. And a lot of this you've already told them in advance. They've already asked you some of these questions. So, it's all set up. So, do keep in mind if the university gives you a tax form, there will be a resource to go to to help understand that form. We're there for you. Um, we talked some about FICA. Well, you may be subject to FICA based on the the rules are a bit different for um non-resident aliens and you'd have to check and see. A lot of that's driven by treaties. Um and and the Internal Revenue Code has a broad period. Uh sometimes it's five years, sometimes it's two years, but that would be when you're working as an employee. So, there's a lot of exceptions for non-resident aliens from FICA. And the reason is you're not here. You do realize and I don't think I mentioned this earlier, but u you know FICA is really for retirement. You're working today. They're taking the money from you today. So [clears throat] when you go to retire, they put out a fund and they give it back to you. And that's really what FICA or self-employment is supposed to do. Um how it really works is the lower generation uh or the younger generation is actually um affording the social security payments for the older generation. Um, so you folks are going to be paying my social security in years to come and I appreciate it. So, thank you. Um, and that's how how that works. Well, with the NAS, they're really not going to take advantage of it. So, there's more exceptions. So, that's really the reason for that. Um, and then you have your US income tax returns. You, if you've got US sourced income, as we mentioned, you have to pay you have to pay the tax. You're now a lot of that will be filed on your behalf by payroll, but you still have to reconcile your return. uh and it's on a 1040NR and you have to file that next April of uh April of the next year and you have to basically be able to explain um uh your situation and uh there's a form for that the 8843. So it's can be confusing and what we have down here is you can contact payroll if you like. We also have some good web resources. International center has a software so they have a Turboax that'll help you walk through this for non-resident aliens and it's for free. They don't charge you anything. They also will provide some pretty dogone good advice to help you get through this and really figure out where you are. So keep in mind if you're a non-resident alien, you're in good hands. First, you don't have that extra burden from a tax perspective, but secondly, you have a lot of resources. You're getting a form so you can talk to payroll and you got the international center which will will give you a software for free to use and at the same time provide you with some information. Now, it won't be advice, but it'll be information for you to be able to do what you need to do. So, it's a very important and a very helpful um um resource. So, at this point, I think I just want to give a quiz. Um and that will prepare us for going into the tax returns. Um uh and this uh basically is always a trick question. Do know in tax they usually are. Would you rather have a $50 deduction or a $15 credit? 50 is more than 15. So, most people would say the deduction and actually the answer is credit. We'll walk through that. So, as you can see here, what you've got is this grid. And on the left column, this is what the tax return looks like. The concepts are what's your income? What are the deductions? Subtract the deductions from income. You have taxable income. That's what you're going to get taxed on. The tax rates of 10%, we're going to tax 10% on taxable income. Now, if you have a credit, you can offset the tax. And this is the difference between a deduction and a credit. And then, of course, the difference, sometimes you owe, sometimes you get a refund. So the middle column is the deduction, the $100 or I'm sorry, the $50. So you earn a h 100red, you subtract 50 out, you're left with 50. With a 10% rate, you owe a $5 tax. Not so bad for earning $100. Um credit is zero. So you pay the $100. With the credit, you start out with $100. You don't have a deduction. Oh my. You're taxed on the full $100. At 10%, that's $10. But a credit offsets tax, not taxable income. it's much more powerful. So, what you have then is a negative number. And uh basically, if it's non-refundable credit, you don't owe any taxes. But if it's a refundable credit, the IRS will pay you $5. So, [clears throat] it's a money maker. Okay. Anyway, we'll talk about these concepts as we go through with the case studies, but this does set those up. Um before we get to case studies very quickly, there is another form out there, a tax form that you may receive and again you get a tax form. There's a service you can call and that's student financial services and they will help you walk you through this form. So what this form is is basically a credit just what we were talking about earlier and it's really if you pay for your education the the IRS Internal Revenue Code and the IRS manages it will allow you an education credit. There's two kinds. American Opportunity Credit, which is refundable, and then the Lifetime Learning Credit, which is not. Most of you may qualify for the Lifetime Learning Credit. Very few. The American Opportunity Credit. It's based on age. And if you're over a certain age, you won't be entitled to the AOC. Um, and then you're entitled to it only if you're cash out of pocket. So, if uh the university you got a full ride, you didn't pay for any of your tuition, you didn't pay for any of your schooling anytime during the calendar year, even if you were at an ear school earlier in the year and you you were on scholarship there. If you didn't pay anything out of pocket, you can't take advantage of the credit because you're not out of pocket. Uh you haven't paid for it. Um, but if you if you come it came from another university where you actually paid full for for the full tuition, you may qualify for some of this credit for the for the calendar 26 year. Um, and uh these uh I'm going to show you that the these two slides are very similar. This and the next one and they walk you through it's a you know decision tree and this is for AOC and the next one's for the lifetime learning. They're very similar. And you can see when you get down here, the question is, were the same expenses paid entirely with a tax-free scholarship or grant? And if that's the case, you can't take it because you're not out of pocket. You can't benefit from from a you can't get a cash benefit when you didn't didn't actually pay uh for any of this. So, that's usually how it works. So, you got to be out of pocket in order to benefit from it. Um, now it says 25. Again, the IRS hasn't updated this, so I just want to let you know. 26 will say the same. The law hasn't changed. Um, and then here for the lifetime learning, it's this down here where the same expenses paid with a tax free scholarship or grant. And again, if you say yes, you won't be able to take it. Uh, so that's how it works. And again, the the rule is the same for uh the the 26 year. Now, they did update the form. So, we do have it here in the 1098T. So, if you get this in the mail, you may get very excited. Oh, he credit sounds great, but you may also have to realize that if you had a tuition was completely paid for by scholarships, you're probably not going to be entitled to it. How you know is box one is the tuition. Box five includes the scholarship. And if that's this equal to or greater than and box five may be because your scholarship may be what the tuition was waved plus whatever cash you received. So you may end up with a higher number in box five than one and that would mean you're not entitled to this. So that's something to keep in mind. That said, for those who it does apply to, the 1098T gives you information for you to then put on [clears throat] your tax return. But you need to have a a separate form to do that. That's the 8863. And that's narrowly tailored to your situation. So this form here just helps you prepare that form there. And that's usually how it works. So, um, a lot of times students will call up and say, "I'm not sure how it works or whatever." If you've got questions, as we mentioned, student financial services can help you. Um, and then that form will help you with this form. So, that's how it works. And you may get a credit. Here's what that form looks like. And you can see if you get some time, you want to go through it. [clears throat] Always very exciting. And you know what they say about tax professionals? We're we're not boring people. We just get real excited about boring stuff. And this is boring stuff, but it's it's very it's very helpful to get through and uh you may need it if you have that situation. So, it's something to keep in mind. So, now we're up to your situation. How do I file my taxes? So, we talked a lot about tax billable income and how to pay them and what the impact is in the general rule. So, I'm going to stop there and ask, do we have any questions? >> Hi, can you hear me? Okay, Edward. >> Yes. Hi, my name is Ariana Cabodian and yeah, thank you so much for for your time. I really appreciate it. Um, a little bit uh maybe like I don't know 10 minutes ago you were talking about um how the IRS I think you said might reach out to you and if it's not the IRS, I'm sorry. Uh saying like, "Hey, where's your, you know, info or something?" And then you respond with, "Well, I'm actually a student." And then they say, "Okay." Do you know what I'm talking about? >> I do. Yes. That would be Yes. Go ahead. >> Would they would they be like, "Okay, and then that's it." Or um why would they how would they know that what I'm saying is true? And then if it's a simple, okay, that's it. Then why would why would they how would they I don't know. It just kind of seems odd, I guess. So you raised a great question and this is very important because a lot of tax is answered with documentation. So uh this would be the case whether you get audited which is unlikely. If they audit you would be through us and we do a pretty good job of making sure that that's not going to happen. Um that said uh you may get notices. Now, in this case, Ariana, we actually answered that question because we had 12 or 14 students come forward and say, "We all got the same letter and we saw it as a design flaw with the IRS so we could respond on behalf of our students without it looking like consulting." Um, >> okay. >> So, we were able to do that and in that case, we basically said, "Here's the in that case, Ariana, what we said to the IRS was this is the law. >> You're not understanding how it works." So, it wasn't necessarily that we had to attach any any of your tax documents or anything else. That worked out real well. And I I talked to the person in Philadelphia. They were extremely apologetic and, you know, they couldn't believe it happened and and that's a good sign. So, that means it goes away. And then that means they clear your account. And all we did is follow up to make sure they cleared your account so they weren't going to continue to bother you. And we let all the students know. But normally, we won't get involved with any kind of notices you get from the IRS because it's personal to you. But if they do come out and reach out to you and say, "Listen, we we don't understand how this happened." When you, and we'll talk about this in case studies, but when you fill out a tax return, you don't attach your tuition statement. You don't attach anything. So, they come to you and they go, "What happened?" And you go, "Well, here's how this went. Here's the letter that said I got a scholarship and they were going to wave my tuition." Okay, fine. And we they should know that the law under 117D says that should be excluded. 117A should be excluded from income. Um, so my sense is so they shouldn't be challenging the law. That's when they come out with notices. They'd like to see how this work. Um, and you'll see this sometimes on on the quarterly estimated tax payments. They go, "Well, you paid them in in all in in April and September. How do I know you received your income then?" And you just give them a copy of the check, cancel check. Here it is. Here's when I received it. It's cash basis, so it's when you received it. And they say, "Okay, fine. and you've got it. It's not a problem. A lot of the documentation we're talking about, you have uh it's just a matter of gee, what do I need? Well, a lot of times whatever you're using to prepare your tax return is probably the documentation you're going to need on an audit. That's usually the rule of thumb. And you want to make sure you you have access to it at all times. If you want to save it down on something, that's fine. But, uh in our day, it was shoe box and students move a lot. And uh one thing you moved, everybody had their shoe box with them. You know that sometimes you had a sleeping bag and a shoe box and that's all you had. But >> oh, like an actual shoe box. Gotcha. >> Yeah. Yeah. Yeah. And and it wasn't for shoes. It was for all your tax documents. So that's the idea. So you rais a great question. Something to consider as you go through. But yeah, that's what an audit is. And it's a show me audit. So you just need to be asking yourself questions. What would I need to prove to myself? Oh, I'll do this, that, and this. And then you have built yourself a defensible file. >> Gotcha. And then that's when you'd reach out to your accountant if you had one and they would do what you did. >> Yep. Yeah. And they and they answer questions and go forward and Yeah. But you >> Okay. >> The value here is you're already way ahead uh just from the questions alone and what you're what you're learning. So that when you go to a tax uh professional and a preparer, you already know what the issue is. A lot of times they they're you have to point them in the right direction and so forth. you'll be able to make sure you're getting you're going to get the right answer or a better answer by knowing what you know. So, well done. >> Okay. Thank you. Yeah, I'm assuming the documents will be accessible for us in Wolverine Access. So, but it's so good to keep in mind of these things. So, thank you so much. >> Uh any other questions? >> Yeah, we have a a couple more in the chat here. Um, as a grad student, I'm getting my tuition waved via not scholarship but some other waiver due to my position. Does this still count under the same category you're talking about on slide five? >> Yeah, I think that the great question and the down the just basic question is going to be are you uh paying it? If you're not paying your tuition and then it's been waved and it may be waved because of a certain fellowship or scholarship or or for another reason, but you're not paying it, you're getting away with not paying it. You're getting a benefit and then that benefit the IRS considers to be taxable income to you. So, somebody gave you a benefit. Now, if your grandparents or something like that, it comes from an individual along those lines, that's going to be viewed as a gift. So that's not there. Somebody in your family is paying it. It's just not you. And gifts are excluded from income tax. Um, so that would be fine. But if you have an agency or something along those lines paying and absorbing your taxes, then that's a benefit you're receiving that's taxable. I hope that answers your question. >> All right. And then the next question we have is, do grants for research count as qualified scholarships? These grants are supposed to be used for travel and accommodation while performing summer fieldwork and data collection. >> So Danielle, thank you. And I don't know who asked that question, but I have to tell you it's an excellent question. And I think the reason is um this is where it's up to you to go back to Ariana's question. Um you know, uh IRS is going to come in and say, "Well, how do I know that's related? How do I know it really is for the pursuit of education? How do I know that's your purpose? you're telling me you're just traveling. That sounds like that's a lot of fun and personal is taxable. So, you know, you sit down and say, well, here are the terms of the grant. The grant includes it. Uh, more importantly, I reached out to my faculty and said, I'm taking a travel for this purpose, and I'll be able to report back to report back to you on exactly what I'm doing, which is actually part of my grant. You know, you can you can have you can't have too much documentation. You can overemphasize what you have. build your case. But yeah, that should be fine. If you've got the if you've got the situation where you said, "Yeah, this is the whole point of this is for me to I'm I'm studying the koala bear. I can only go to one place to study the koala bear. It's obvious to me." So that's the idea. So you want to make sure that you make that you make that very clear that yeah, this is all part of the same process. This is part of the tuition costs. They're required as part of the curriculum. That's how it works. and you got your faculty to agree or acknowledge and so forth. So, you're fine. That's the idea. But you build your own case. Um, that's me anyway. Uh, you could probably do it just the same without, but sometimes agents can be difficult. Depends what they had for breakfast. So, it may be more challenging, but that's the idea. Um, >> do two more for you, Ed. Um, if I do want a personal consultation, do you have any suggestions to whom I can reach out to? Well, there's a lot of places, you know, there's, if you always hear commercials, HR block and things like that. There's a lot of accountants around. Um, and that's not bad either. Particularly, some people have a very complicated situations. Rental properties have the significant cap gain uh from stock sales and so forth. But my sense is whatever you think works best for you is, you know, great. I I personally would like to talk to a lot of my peers just so I get a better feel for it. That way, when you go to a service provider, you have a real good feel for what you're doing. You can you're going to get paid. you're going to get charged by their hour and they can spend that hour like I am explaining the general rules or they can take that hour and answer your very specific questions highly detailed uh and review your computations. So, however you want to do it, uh whomever you want to use, it's up to you, but I would make sure you're as prepared as you can be before you go. There you are. That's my thought. >> Thank you. question I have for you right now is I am a Michigan native and an incoming grad student who has zero scholarships nor financial aid paying myself. What tax form do I need for the upcoming April 2027 year assuming these are on Wolverine access? >> Um so we'll go through some of the forms. Um we we go through a Michigan form and we go through a a federal form. Um, and then I think uh that's the tax forms that you're going to file and then it all depends what you're they're pretty good about it and the instructions of telling what else you'll need. So you get to that line item and they'll say you also need form whatever. So that will help you get through it. So we'll go through some case studies and then if you have some questions let me know. >> Sounds great. That's all I have for you right now. >> Okay. So now we're going to talk about cool estimated tax payments. This is a tough one to get a hold of. comfortable with. So there's the concept. Okay, I get that. And then there's actually really how's it work and I get it and I understand and I feel for you. I can honestly say with tax, it's a ripple effect. So it's like throwing a [clears throat] stone in the water. You know, it's every time a little bit more you get a better understanding of it. And the more you hear tax, the more you'll get more comfortable with it. Uh and that's just the rule. So uh and I'm um I've got the gray hairs to show it. Um, so in this case, uh, and again, we start out with humor. Uh, as you'll find as we get through the outline, it's just not very funny. Uh, when my kids were younger, they would look at when they were bad, I made them, you know, review my outlines and it's a great tool for, you know, uh, making sure kids kids are good. And, uh, they would go through and say, I noticed you have jokes at the beginning. Yeah. It's not very funny at the end. So, just the same, we do our best with humor, and that's how you get through tax. uh and uh but it it is it is a struggle. So now with your tax return, there's a couple things you need to know. Uh one is there's a filing threshold and um this is very important because you may not have to file a tax return although you may want to and this all comes down to the standard deduction. Uh every year it changes. What we do have is the 2026 in here currently and again that's done by classification. So, it's something to know. And basically, it the standard deduction should not change for your scholarship. Although, when you go to read the instructions, it may sound like it does, but it doesn't. So, it's just something to keep in mind. And we have examples to show this. So, what I'm trying to say is if you the standard deduction is $16,100, you get that for being a human being, just for breathing. And basically, if you turn around and you have $15,000 worth of uh taxable income, you don't have to file a tax return because the deduction is greater than the income. You have a negative. Uh that said, you may have actually had some kind of withholding. It could have been on uh a tax form for interest or it could have just been a job that you had. $15,000 was a job that you had and they withheld taxes. Well, the only way to get back those withhold held taxes is to file a tax return. So, even though you may not owe anything, you may still want to file a return. Um, and that's the filing threshold. That's very important because that's going to come in and we pretty much presume you're single throughout this, although I realize that this that's just to make the calculation simple. Um, all throughout our examples. So, that's where uh you'll hear standard deduction. Now, again, we're using 25 forms, so you'll probably see last year's standard deduction, but that's what it is. It's a deduction that you get. You didn't have to pay for it. You didn't have to do anything for it at all. you just get it for being for being you. Um, and then there's something to keep in mind. These are concepts that used to play in big in the past for your tax return, but today it really plays into your parents' tax returns. Um, and it's whether they can take you as a deduction on their as a an exemp as a dependent on their tax return. And you'll see that in a minute when we show what the case studies looks like, go through one a form. You'll see that. But bottom line is the question is are your parents going to take you as a dependent? Chances are no. Um and based on these tests, but I'll walk you through them just the same. You can either be a qualifying child or a qualifying relative. If you're one or the other, um then you can be claimed as a dependent. We start with the qualifying child test. As you can see, it's based on relationship. So you're pretty much going to check that box. But you have to check all five. And the interesting one is box two. If you're 24 or older at the end of the year, um your parents will not be able to take you as a dependent on their tax return. Um that means then we look over at the qualifying relative test. So if you fail the one, you can still pass the other. And again, you check the boxes, but in this case, you get the box three, your stipened, the taxable piece of it would have to be um greater or less than $5,300. That's just not usual. So bottom line is it' be very rare for your parents to take the claiming exemption, but you'll see the concept on the returns. You may hear the parents ask you about it. Um, by the way, I've always thought that if they do take you as a dependent, you're helping your parents to lower their tax. And if that's the case, um, you know, there's nothing wrong with saying, "Oh, how much did your taxes drop by?" And they show, well, $1,000. You say, "A,000. What was that? 500 for you, 500 for me." So, there's always ways to work through that, but just the same, this is a concept you'll hear again more from a parent than from your perspective, but it is something I just want to make you aware of. First case study, you're a graduate student. Um, you're single. Uh, you receive $16,000 as a scholarship in 25. You're a US citizen and you're 23 years old. Mean somebody could take you as a dependent possibly. And you work solely on your scholarship. You have no other income. Oh, that's the joke, by the way. Um, and I'm letting you know that's, you know, see, it's not even that funny now. But if I put at the beginning of who knows. Um, so here's what a form looks like. Now, we I know it's hard to read through, but uh I'll walk you through it and you'll get a sense. You get the form 1040, the tax year. Again, we don't have the new form. That's where your SO goes. So, the tax information, who you are, address, and so forth. Here's the filing status. They want to know, are you single or what? because that's very important as to what the rate is. Then we get down here uh on dependence and if a parents return, they might put your name on there and that's what's very important to them because they get a deduction for that. Then you get down here and you get to the income and you think line one would be the income. That's for wages, but because you're a scholarship, you're down here and uh then you get the you have to add them and that's income is at the bottom of page one. So that's just $16,000. Bottom top of page two, you bring the 16 over and then you use the standard deduction. Now, this one's lower than what we saw because this is for 2025, but in the end, you end up with $2 I think it's $50. Very hard to read. Um 10% tax bracket, $25$26 and that's what you owe. And when we get into quarterly estimated tax payments, you'll hear about how that works too because that's very helpful because that is a um uh if it's under $1,000, you don't have to pay. Um case study two, we have a postoc student uh who receives a grant of $17,000 um US citizen and the expenses are all the stipen is all for living expenses. That's very similar to how we do it at U of M. We wave your tuition. you won't you don't pay for that. Uh and then and and we give you a credit. You just you know uh we don't charge you the tuition but then we'll give you cash stipens and that's two generally what's taxable but for that which is required for the curriculum. Now in the alternative scenario we're doing two at the same times and see is the result any different. And in this case, and this is not how we do at U of M, you get 27,000 and then you have to use the nine for tuition, a th000 which covers books required for the curriculum. You're left with 17 for rent just like above. So, you know what's taxable and how's it show up on the return? Well, $17,000 is what's taxable in both scenarios. And what shows up on the return is just the 17. This piece here, the IRS doesn't want to see, but to go back to Ariana's question, this is what you're going to they're going to ask to say, "How did you get from 27 to 17?" You're going to need that documentation. In our case, you can just say they waved tuition. I just have 17. You won't have to have you have less documentation, less to prove. So, that tax return basically same situation. Uh in this case, yeah, your your filing status is single. Um, and then you've got a situation where um, you have 17,000. That's what you have total. That's all you have. That's at the bottom of the page. You could have income from interest, dividends, and so forth all throughout, but we're making this example very simple. So, in this case, 17. You subtract out the 15750, which was the standard deduction from last year, and you end up with 1250 of taxable income. That's the net amount. And again, you get this expense, the 15750 just for breathing. So now you do the tax 126 and you're going to find again that's under the $1,000 threshold. So you don't need to make any quarterly estimated tax payments throughout the year. Just don't you get to come up with that 126th April of the following year and then brings you up to estimated tax payments. So let me stop there because this is a a good question on some of this. Anybody have any questions? So I'll jump into quarterly. Uh again, funny but not so funny. Um so now we've identified and quantified. Okay, we do have tax and here's how much I owe. Um now we have to make payments and we have to do it as we earn as we earn it, which is that concept we talked about before. So now you basically supposed to do it within four quarters. That sounds like a lot of fun. And the first one is January, February, March. All the cash that you've been paid during those three months, you have to figure what you owe taxes on. And then that April 15th, you get two weeks uh to basically pay it in. And we'll talk a little bit about that. What gets confusing is it's not every three months. Then you go April and May, and then you have to make a payment in June. It's only two months. And then you go three months, which is June, July, and August. and then you get to make a payment in September and then you have four months September, uh, October, November, December, and you make that payment in January. So, it's very confusing. Um, and why they do that, I don't know. But the idea is you need to figure out um, whether you need to make a quarterly estimated payment for the quarter that you're in. And um, we'll walk through some scenarios. The form is a 1040ES. A lot of it can be done electronically now, so it's not a problem. But to go back to Ariana's point, you always want to make sure that you have documentation that you paid it. They will take your money and forget you paid it. So you want to always have documentation that you paid it. You will receive notices that says you didn't pay anything in. Here's your tax. Here's your penalty. And you go, no, no, no. I paid it. Uh we get notices probably we go into the office. We work remotely. We go in every Wednesday mostly to handle the notices. We get three or four notices a week. uh and the IRS says we didn't do something and we did and with us of course it's millions of dollars so it's just that much more fun. You also have an obligation at the states just as you do at the Fed and for instance in Michigan uh basically that balance uh is the 11,765. You really won't have to owe anything until you're beyond that. So because they make it they give you a $500 threshold and that $500 at 4.25% gets you up to 11765. So, um, and what the IRS does, and they have this publication, it's listed on the very last slide of the of the presentation, how to estimate your taxes. It's a worksheet, and you really just figure out what how much do you think you're going to make and you add it in. And if you're married, then you have to add in, if you're going to file jointly, you add in your spouses as well. Um, and you get to figure out what that is. Now, that can help actually if you're married because uh your partner is going to be out there working away and actually having a lot of um taxes withheld on a lot of this. In fact, you may have them overwithhold and then you don't have to pay any quarterly any taxes on your scholarship because it all goes into one bucket and they've already paid a lot more on what they should have paid. That excess comes over and covers your scholarship. So, there are certain advantages to having your um um filing jointly. Um and in this case, you you just figure out a return like you like we just did. You just annualize it. We're going to make 30,000 in the year. We got the deduction. That leaves us with 14250 at 10%. Well, it's a little bit more than 10% because the bracket just a little bit more. Um 1462. And at 1462, that's basically what I'm supposed to be paying over the four quarters. Now, uh there are certain exceptions, which is uh you only have to pay in 90% of the current year or last year. It looks like you paid in 1303. You can pay in the lesser of 90% of the current year or 100% of last year. Uh and a lot of times folks like to pay in the least amount until they actually have to make that payment. And that's what this allows you to do. And then of course down here you divide it by four. So you come up with 326. And that's really what you're looking at. Um tell you the truth, you can manage it any way you like. If you owe 1462, you can pay in a good $1,500 in in um April 15th of the 2026 year or 2027 year and that would cover the the entire year. Um and that would be fine. So that's the idea. Um so you can pay it all up front. You don't want to pay it late. you'll get hit with penalties, but you can pay it up front if you like. So, if you're worried about, oh, I I can't remember four quarters. I can't remember this two month, four month, three month, I'm confused. Well, then just pay it in whenever you think you can. The earlier the better. And uh you can manage it your way. Quarterly estimated tax payments is something you really want to talk to other people about because everybody everybody has a a a strategy and a lot of times you get all those together and they really make a lot of sense. So, and you find something that works for you. Corius made tax payments can be interesting. Um they're basically filed on a 1040ES like I say and you'll see payment voucher one. This is for the first quarter. Um then you got your social security number which they definitely need. Um and uh and all the information that's going to be on your tax return. You also run some stuff on the check that you send in as well. But again, so much is done electronically. Feel free uh just keep documentation as you go. Um, and then you'll see this in the publication as well. The IRS is always very good about making sure uh how to keep you organized when you're going to pay them money. Um, they're not very good at remembering you pay them, but they're very good at making sure you do. Um, so here you are there. So, if you need it, there are things out there you can use that can um, you know, help you with aids to make sure that you're making your payments. Um, penalties. Now, this is a very important part of the Internal Revenue Code. It just makes a terrible parent there. There's no positive reinforcement here. If you do something wrong, you're penalized. End of story. Uh you do something right, they don't say anything nice. Um so, penalties, what kind of penalties you're looking at? Well, uh the penalties can be userious. They're very high rate, but they don't kick in uh until it's in excess of um uh what's considered to be uh an underpayment penalty. And you can go the whole year just paying in 90% of the current amount. You can leave 10% for the that next April 15th when you following April 15th when you go to file your 1040. You can do that and you still not be charged or you can pay in last year's 100% of last year's which may be way less than what your current year is and then make the difference. Again, a lot of people like to hold on to the tax payments as long as they want. But this is usually people who make a lot of money. So, we had a client who had uh um come up with some type of royalty arrangement. They made like $30 million in one year. Well, the year before they were making $200,000. So, the tax on $200,000 was much less. That's all they paid in during the quarter. And then in the fourth quarter, they had to pay the huge amount which represented the increase in income that they had in the current year. But again, that's when you really want to make sure you take advantage of the interest instead of giving it to the IRS. That's what they do with it. They take your payment and they put it in uh to an investment and they they make interest on they make ear earnings on and that's what they do with your money which is why they get very upset when you don't pay in when you should because that's their money interest they could have earned. Um these are things again ripple effect you'll get comfortable with when you hear the concept a few more times. Uh, and again, most importantly, there's an exception. If the tax liability uh that you owe is $26 or um 1426, well, that'd be interesting. Uh because the $26, $125, that's below a,000. But at 1426, you're over and yeah, you're going to get hit with a penalty if you don't do quarterly estimated tax payments. Now, we're hit, and this is very helpful to you folks because we're in August. So, you might be just incoming students and you're sitting there saying, "I just got uh paid or I'm not going to get paid till September." Well, that September payment is cash. It doesn't hit until the month of September, which we know doesn't fall into the it falls into the January 15th quarterly estimated tax payment. If you receive something this August, then you have until September 15th uh to pay the tax on it if you need to. If you have a partner, sit there and ask them what they're making and figure out if you even need to pay any taxes. So, there's a lot of things to think about right now because it's pay as you go. Uh, so that's the idea. Quy estimated tax payments. So, I'm going to stop before we get to the states and turn around and ask turn it to the group and ask you folks any questions on quarterly estimated tax payments. >> I have um couple questions for you in the chat. Um to confirm, do GSAs get their tax withheld so they only pay taxes in April? >> That's a great question. Yeah. What happen generally? Yes. Uh it's contingent on the W4 that you fill out. So you may say don't take any taxes out. Then you'll end up having to do quarterly. Uh you could also tell them overpay, withhold more than you need to. that people do do that and then they end up getting a refund back in April or they use some of that excess amount to cover their partners' fellowships or whatever. But yes, a very quick answer to what you're saying is that should generally they should you should be man that's a good way to manage your taxes. You shouldn't have to worry. Uh you might want to check and make sure and it's always easy to do you know pull up what you've got on the last payub and annualize it and make sure it looks good. But um yes, that should be that should give you comfort. Right. And then the second one is if you're on fellowship, you get no taxes withheld. So you need to make quarterly payments. Yes. And to go back to the earlier question, if you're a GSRA half the year and a fellowship the latter half of the year, your first half is probably going to be covered, not the second half, because nobody's withholding for you. So you're going to have to withhold in that second half unless you overwithhold in the first half. That's how it works because it all goes in one bucket. But that's the idea. So yeah, fellowships, you got to pay if you're gi somebody's doing withholding on your behalf. That'll help. But if you're fellowship, it's on your own. And you're going to need to make sure that once you figure out what your taxable income is, how much tax you're going to pay, and it's up to you to pay that it. Yes. Then the the third one is are firstear PIBS students considered GSAs or are they on fellowship? >> Well, this is a great question for payroll. Um and feel free because they're it's a question. Am I going to get a tax form or not? And uh if it is, it'll be a wage statement. You should have already been asked for a W4 to fill out. You would have talked to payroll already uh if you've already started or received your first payment. Um, if you have it, you're probably being treated as a fellowship. But to confirm, it's a question payroll will be able to answer. >> All right. And then the last one is, can we contribute to retirement on fellowships? >> Um, so I'll get back to that in a minute. By the way, the person at payroll you want to reach out to Leslie Brown. Um, she's very helpful. She'll be able to do that. Now the question on contributions of retirements, do they mean can out of the fellowship can I take some of the fellowship side and put it into a retirement account like a uh like an IRA? >> Yeah, that's that's my question. Um like I yeah IAS. >> So Jack, no because in in essence it's not considered to be earned income. What you're allowed to put into those uh funds are is earned income. So, uh, generally the answer is no. So, good question though. Um, but and thank you for asking it, but no. >> Thank you so much. >> Sorry, I do have one more for you. Um, what happens if you haven't paid into quarterly taxes for the spring semester? How do you make up that mis tax? >> It's all based on time. The longer you wait, the greater the penalty. So, if you miss the day by two days, still pay it in two days, you'll just be hit for two days worth of penalties. um the longer you wait the worse it is. So if you have it and you're like I think I might owe that's fine. It happens you know get her done you know use that expression. My sense is um you know the it's the payment is bad enough but they also like to put you on a list you know oh this person is delinquent and they like delinquent people. You're very popular. So you want to show good good faith too. So you say I'm sorry this happened. It won't abate anything, but it certainly explains your situation, and they're very they're very understanding. But keep in mind, you still have to owe $1,000 or more. So, if you sit there and say, "Man, I looks like I owe $28." Well, are you going to owe $1,000 or more? Because if not, then, you know, then you're good. And now that thousand is really split into four, 250 each if you want, but the bottom line is you have some leeway. So, keep in mind, feel free to go back and calculate it, make sure you're good because, you know, you may not be having a problem. That said, it never hurts to make sure you you're feeling good about your situation. You don't have to wait till the end of the year to look at your taxes. You know, here you have it. You can have a tax day at the end of every month. It's an exciting time. And just make sure you're on par, you're on schedule, everything's going well. Uh, and if not, you want to add in more. And if if you are good, at least now you'll know. So, it's very help helpful. And again, that's why it's very um um you know, I always find it good to just chat with a bunch of people on this because again, everybody, you're going to learn again the ripple effect. You're going to learn a lot about taxes from how other people compute their taxes. So, I'll stop there. I sound like I'm lecturing. Sorry. Okay. Um so, Danielle, I can move on to multi-state Um, one more. Uh, just to confirm, can my spouse have his job withhold the amount of tax that I would owe and then I wouldn't have to pay quarterly? >> Yes. Yes, that's the beautiful and great question if I'm understanding it correctly. So, yeah, the two of you going to put all your income on the tax return. Um, filing jointly. Well, if the one uh does all the withholding and and you don't do any cuz you're on a scholarship or fellowship, if they did enough withholding, it covers yours as well. It's all in the same bucket. So, and within the 12-month period, and that's the good news. So, your spouse, you know, they they you know, you you love them to death, but uh you also get an extra benefit out of it. They can actually help you if they're working. just say, "Listen, I don't have to pay in quarterly because you just have to make sure you're overpaying and then the overpayment will be credited to to my fellowship or scholarship by the IRS." That's how it works. >> Thanks so much, Ed. I think that's all we have for right now. >> And that's just another good reason to be married. Um anyway, I'm going to move into uh state taxes. Um, this is a this is one of my an IRS agent gave me this. We thought it was very funny. Um, but uh if you ever get to read the code, you may feel this way. Uh, it is very difficult at times. Um, and a lot of times it's nice to have uh peace and quiet. Um, state income tax, just like we talked about the Fed income tax, there's just certain general parameters. One, a lot of the same concepts we talked about the Fed apply to the state. So, in this case, the question is, do I have to file a state return? I filed a Fed. Yep. And you say, "Well, [laughter] wait a minute. Uh, I got taxed. The Fed taxed me on this dollar." Surely the state won't. Absolutely. The state will double tax you. So, you'll pay a double tax. You'll pay the state tax and you'll pay the Fed tax on the same dollar. So, yes. Why do we have a Tea Party? Good question. But that's how it works. Now, that's assuming you have a state tax regime. So Florida, if you come from Florida, they don't have an income tax regime. So you're just going to be paying fed income taxes. Now, what Florida does is have an intangibles tax on anything you keep in a bank or any kind of stock and so forth that you have, and basically it includes cash. So, you know, they just tax you another way. Uh, and I think a lot of it is a lot of people retire in Florida. They're not income earners anymore. They're retired, but they have a lot of cash. So, it it depends how that state looks at it. Tennessee doesn't have an income tax regime. Texas does not for individuals. Um, and you'll see, I think, Nevada and a few other states as well. There's like six or seven. Um, so there are certain things to keep in mind as to whether you're from a state that has it or not. And that'll play into what we're going to talk about as we go. But the idea is if not, then you're going to have to file two returns, a fed return and a state return basically. Um and yes, it'll be on the same dollar. It's very easy, just very painful. Um so then we have multi-state filing requirements and um you so now you have to file a state return. We made that clear, but uh if you have a tax regime, but uh multi-state, how does that come up? Do I have to file more than one state return per year? You may. Well, how does that happen? Well, basically if you're earning income in various states, uh it could be um where you you come from California and you were earning uh wages and then you moved to Michigan for this year for the scholarship and uh now you have you're earning income in Michigan the scholarship and you earned income in California. So the question is how do you want to handle it? And you have two choices. uh you can you can actually just say I'm staying as a resident in California and um that'll be what you and you're you're saying I'm my doicile isn't changing my residency is going to be California no matter what in which case you'll end up filing a tax return as a resident in California and then you'll file a um non-resident return in Michigan and that means if you stay that way you'll probably have to file a tax return two tax returns one to California one in Michigan every that you're in the state of Michigan. So long as you keep California as your state of domson. Now you could also say I'm leaving I'm leaving California. I'm going to Michigan. So it's a partear return. So the first year you'll do a return part year that was while you were in at California and then the other return to Michigan part year for the time that you were in Michigan. And that's usually how it works. Um, and then there's certain attachments you have to make. So every every state's comfortable that you did move and that it's fair that you're only giving me part of your income because you moved. And when you move, you're changing your doicile. And now you're saying I'm a Michigan resident. Now, that can play into all this because what happens is now you're going to be subject to, remember the concept, worldwide income. So Michigan, if you change your residency in Michigan, they're going to tax you on all your income. And if you stay in California, they're going to tax you on all your income. So if you do a part year, you're changing your residency. If you want to keep it to California, that's fine. And then you're a non-resident Michigan. That's fine, but you're stuck with the California tax. California tax is higher than Michigan. So you probably would be better moving to Michigan and taking Michigan. That's the example we have, and we'll go through that. Um uh so getting to just the state, if you're a resident of Michigan, you're going to have to file that one state tax return. What's interesting is um there is a homestead exemption, which is a credit, a refundable credit. Doesn't get any better. Do know, you want to make sure you follow this closely. They have some Department of Treasury is really the the equivalent of the IRS for the state of Michigan, and they have a lot of information of this on their website. So, feel free to read it because they want to make sure that you get this right. But you basically can get a credit, a refundable credit. And you basically have to have a property in Michigan. Uh you have to be a Michigan resident for at least six months of the year. So, it really works for students. Um it's if you own a home or you pay rent, again, it's for students. If you own a home, the taxable value has to be less than $165,000. And then your household resources are less than 71. Well, if you rent, chances are it is less than 71. So, look at that. Look into that and see what happens. So, a case study, you make 8,025 in non-qualified scholarship in the calendar year. We know that that's taxable income. There's no other income earned. You're not claimed as a dependent. That's very important because you get to take the exemption in at the state level. If the parents take you on the fed return, you won't be able to take that at the state level. So, it's something to keep in mind and that's where it does come into fact uh to come into play and the student is a resident of Michigan and lo and behold qualifies for the homestead. It it goes through a lot of loops to ensure that you qualify. So, you want to make sure you get that correct. But if you do, here's what it looks like. This is a Michigan return. Up top is the exemption. You're allowed to take an exemption for yourself. The amount is $5,800. You get to subtract that from the $8,000. You'll end up with 2225. uh the tax on that all on the first page. That's a four uh four and a quarter percent uh $95. Now you bring the 95 over and then you get to bring over the property tax credit from another form which is $425 and you add everything up at the bottom page. You get to page three and they end up paying you $330 because of the homestead credit is $425 which is greater than the tax amount that you owe 95. So, this the state will pay you money. Now, this is very tough. You want to make sure you make you make sure you meet the homestead credit. That's what this form does. And it starts out by asking, are you a resident? If you hit the box non-resident, you might want as well ask the state of Michigan to come out and audit you. There's single, whatever you are. You list here is your uh rent. Um they take a certain percentage. Um then they determine what your wages are because you can phase out how much wages you make. Then they come up, they bring that over and then they make a limitation on the wages. You make some adjustments against that and here's how you come up with the 425 and I think you're subtracting the 257 from the 966 and that'll get you the 425. Um, so that's basically how it works. And you bring the 425 over and to your tax return and that's how you end up getting $330. So Ariana's point is, gee, I didn't have to show any documentation. You don't. You have to keep it though because what the state of Michigan comes out and says, "How'd you do this?" You want to say, "Here, here are my wages, and then here's what I end up paying in rent." You're going to have to have evidence of that. Um, and then make sure the calculation works the way it does, and you should be good. Um, so that's where the strategy comes in. So now we're going to talk about multi-state. And we're back to the point we were talking about. Are you going to be a non-resident and stay in California during the time that you're really earning your scholar your scholarship in Michigan or are you going to be a part-year resident? Well, part year means you've moved. You've changed your residence. You're not a Californian anymore. You're Michiganian. And does that help? When would why would I do that? Well, if Michigan has a lower tax rate, you'd want to do that. Um you may say, "Well, I just want to stay in uh uh California." Fine, but and we're going to go through an example with South Carolina. You'll pay more. Now, you say, "Well, wait a minute. I I'm from Florida." Well, then Florida, you would probably want to stay as a resident in Florida because I don't have an income tax. And that way, Michigan will only tax you as a non-resident, which means on your Michigan sourced income, just the scholarship. So, it's a matter of how it works, what state you're from, what the tax rates are in that state, what you want to do. If you want to change your residency, uh it's very important that you uh prove you're resident of Michigan. That would be a driver's license, voting registration. Um you'd also have and there that's probably the strongest evidence that you can have. Uh and then there's also like, you know, the lease, your name's on the lease, uh you have a bank account, things like that. there they're that's a supplemental re uh uh strong evidence of the fact that you're a Michiganian, but you really want to say how do I want to handle this? How long am I going to be in Michigan for the next couple years? And what do I want to what do I want to do? Uh it doesn't affect your FAFSA. So if [clears throat] you say you're a resident of Michigan for tax purposes, it doesn't necessarily translate that that's what you're saying for FAFSA purposes. So it's se separate and distinct. So, there's certain advantages to being able to figure this out. And we have a case study. We'll walk through that. Yeah. Posttock student gets a $50,000 grant from NIH to conduct research at U of M. Student has interest income of $70. Student earned that income as a resident in South Carolina and is not claimed as a dependent by another taxpayer. So, they get the full exemption. uh the individual would need to file the state tax returns in Michigan and South Carolina because of course and Michigan rate is four and a quarter. South Carolina has a uh progressive rate much like we talked about the Fed rate starts from three% and goes up to six. So if the 50,000 was much less the answer might be different but it's 50. So let's see what happens with that. Um sorry uh itchy finger. So here we are. We've seen the Michigan tax return before. the one the 5,800 um and that's less the 50,000 se well 50,00070 is the income that's what you report on your fed return then you get to subtract the 70 out because you're saying up here you're a non-resident you could only be taxed on the income you earned in Michigan that would be the $50,000 scholarship so you're only charged on the 50 not the full amount I know it's just $70 but just the same you're not charged on the full amount when you subtract that amount out 50 less than 58, you're at 442 with the tax rate $1879, just under $2,000. You bring that over, there you are, $1879. Now, you got to go through some other forms to be able to show certain things so they're comfortable with it. But basically, you owe $1879. And one of the attachments is uh the um non-resident partyear resident schedule because they're saying you're not paying tax on the $70. is you need to explain why. Well, here's the total income. Here's the Michigan income. And then here's the income of another state. And they'll probably want to see a copy of the tax return, at least page one, that you're filing with South Carolina, so they know you've reported that. Anyway, this also helps to calculate how much your exemption amount is. And since the 50,000 is almost the entire taxable income, you get 100%. So, and then you can see here it is. They're asking, "What is this that you're saying here?" So you're saying, "But it's interest income." Well, interest income resides with the individual and where you reside is South Carolina. You chose to remain a resident of South Carolina. It's where your bank is and that's where the interest is. So that is actually South Carolina income. So Michigan, if it's if you're a non-resident Michigan, they can only hit you or tax you on Michigan res uh Michigan sourced revenue. And that would be the 50,000 which is the scholarship but not the interest that belongs to South Carolina. So you're the good news is you only charge them 50,000 instead of the full amount. The bottom line is though the rate is a little different. The rate's much higher in South Carolina at $50,000. So here Jane Doe has the one exemption and then she brings over 50,70 which we know is the full amount. Why? because you get taxed on your worldwide income. If you're a resident of South Carolina, they're going to tax you on that Ireland sales, too. Then you get your deduction of 4930, which is nice. 45140 for 267. That's how much you owe to Carolina. And you go, well, wait a minute. I already paid tax in Michigan on 50,000. So, so what happens there? So, we subtract what you paid to Michigan, the 1829. So that leaves you with 188. But because the rate is higher in South Carolina, you're now paying $188 worth of tax on $70 worth of interest because the tax rate is higher. If you went and stuck with Michigan, you would had a much lower amount. So that's how this can work if you don't understand uh the difference between the two. So, I just want to make sure you see that uh and then you ask yourself, do I want to change uh my residency uh or should I? And if not, some people were comfortable staying with South Carolina and they just pay the extra amount. It's comes down to a financial decision, but it is something that's legitimate so long as you do eyes and cross tees. And uh I think that's how it works. This is the last page we mentioned on publications. And you can see again the ones that for higher ed 970 deals with most of the concepts we talked about. 505 is withholding and they have the example we talked about for estimated taxes. 515 is for non-resident aliens. It's very helpful. 17 is voluminous. Uh it has everything under the sun, but it's voluminous. So you can get lost in that one. But that's really it. So let me toss it over to you um uh Danielle for questions or if anyone else has any questions. Yeah, if anybody has any questions, feel free to unmute and ask Ed. Um or just throw them in the chat as well. All righty. Uh so let me So if I can I'll preach a bit. I know I sound like this and after a big presentation like this I also sound like a Darth Vader so I get that too. But bottom line is um you just want to be real comfortable with the uh ripple effect. you're not going to get it all first time. If you do, it's amazing. And we do have some people who do and and I and I applaud that. But if not, don't worry. You'll get it as you go. And again, you have each other to learn from. There's also other sources we talked about. Master text Guy is wonderful because they explain concepts. You can Google a lot of stuff. It's pretty good. Um, but you know, particularly when it's AI, you get what you get. Um, but the idea is you do have a lot of opportunity uh to learn as much as you can and bring in as much as you can. So, it's really not that bad. So anyway, as you get through it, we do have other sessions throughout the year. So again, you can feel free to attend particularly with any situation that comes up for you and again ask whatever questions you have. Um uh I can answer anything during these sessions. So anyway, on that note, I am going to stop and I'll turn it back to you Danielle and uh and and the team. >> Well, thank you everybody for joining us today. Um, just as a reminder, there's an evaluation survey in the chat. Again, this uh does help us improve our workshops. Um, and then also I just want to remind everyone that you will be sent a follow-up email and the slides um following the workshop today. And again, if you do have questions, feel free to put them in the chat or just unmute, ask Ed. Um, and if not, that's all we have for you today. And I hope everyone enjoys the rest of their day. >> Thank you. And thank you, Ed, very much for your time today. >> Well, I appreciate it, Danielle. And thank you,