Federal Work Study Taxes

Federal Work Study taxes are typically payable by all students enrolled and actively participating in the Federal Work Study program. This program is designed to assist students with financial need to pay for the costs associated with pursuing their post secondary educational objectives. Income generated under this program is generally considered taxable on a federal level, but other taxes such as social security, Medicare, and defined contribution programs may or may not be taxable. As misinterpretation or misunderstanding of Federal Work Study taxes can have long term consequences, students are strongly encouraged to consult with a tax professional in order to ensure that the their tax liabilities are appropriately managed.

Because money earned from work study programs is considered taxable income, Federal Work Study taxes are usually payable by all students participating in the program. A student’s individual tax liability will vary depending upon how much money they are awarded and subsequently earn, their student status, parental status, and many other factors. Students that earn under a certain amount may not have any income tax liability at all relative to Federal Work Study taxes. In any case, all students participating in the Federal Work Study program must fill out an IRS from 1040 to report their earnings. Students are cautioned to remember that for reporting purposes, money earned must be calculated by the calendar year- not by the school year. Information provided on the form will be used to calculate how much tax; if any, a student owes.

Not all types of taxes or contributions are required to be paid as part of Federal Work Study taxes. For instance, students enrolled in the program generally pay Social Security taxes. However, if the student is working for a school, college, or university through the work study program and is also attending the same school at least ½ time, then the student is not required to pay Social Security tax contributions. Also, students enrolled in a degree program that requires work study as part of a specific degree path may not be required to pay any Federal Work Study taxes at all, as the mandatory nature of their coursework alters their tax liability. Additionally, students may or may not be required to pay state and local taxes and Defined Contribution Plan savings. This may vary based upon the student’s individual tax situation and the school’s rules, regulations, associations, and partnerships regarding the Federal Work Study program.

Some schools provide further assistance to students by limiting their exposure to Federal Work Study taxes liability. This is accomplished by subsidizing those liabilities on behalf of student who meets certain enrollment, course load, and total- hours-worked requirements. Because the Federal Work Study program allows schools a considerable amount of flexibility in administering the program, there exists a great many special features and benefits that are different from school to school. Therefore, students are advised to seek counsel at each school they may plan to attend in order to determine what liabilities they might have regarding Federal Work Study taxes.

Regardless of a student’s individual tax liabilities, all students enrolled in work study programs are required to complete IRS/Employment form W4 and similar state reporting forms. Students should be diligent and ensure that any Federal Work Study taxes are paid accordingly, as problems can result with further aid if this essential issue is not addressed or maintained appropriately.

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