Procedure 23800: Fellowship Payments
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Introduction
A fellowship payment generally is an amount paid for the benefit of a student to aid in the pursuit of study or research. Students receiving fellowship payments are not required to work in order to receive these payments. Taxes are not withheld from these payments.
Procedure
Although the payroll system is used to disburse fellowship dollars, fellowships have no relationship to employment. The recipient should not have to perform any service to the University (now or in the future) in order to receive fellowship money. If there is a requirement to perform services, the payment should NOT be paid using a fellowship position (STPxxx); the recipient is an employee and must be placed on the wage or salary payroll.
When dollars are paid as a fellowship (because there is no work requirement), no taxes are withheld and no year-end W-2 is generated. U.S. citizens are on the honor system to report this income when they file their taxes in accordance with IRS regulations on scholarships (Publication 970). However, different tax rules apply to International Students. For them, the university is required to collect taxes on the fellowship and to report those amounts at year-end to the IRS on form 1042S.
Restrictions
Fellowship payments are typically charged to sponsored or private funds. They are not allowable charges on educational and general funds (state operating, overhead, continuing education surplus, etc) or auxiliary operating funds.
Processing
A pooled fellowship position (STPxxx) must exist in the Banner Human Resources System (HRIS) for the six-digit organization number before a fellowship payment can be disbursed to a student. The Employee Administration Group in Personnel Services establishes these positions upon request from the department. Only one pooled position is needed for each six-digit organization number. All of the STPxxx positions are paid on the fellowship payroll (ST code).
The student is entered on the NOAEPAF form once the position is established. See the Personnel Services web page at http://www.hr.vt.edu/bannerhris/ for the HRIS Banner Training Manual for the NOAEPAF form instructions.
If the fellowship payment will be funded from a fund in the Virginia Tech Foundation (VTF) (fund number that begins with an 8), a University local fund must be established for these charges. Contact the General Accounting Section of the Controller’s Office with the VTF charge fund number, department’s organization number, and description of the VTF fund to obtain the local fund number to be used for the funding. The Controller’s Office processes a monthly billing to the VTF to obtain funds for fellowship charges to these funds.