This is the unofficial website of the NSF AAPF program, run by the fellows themselves. For official information about the fellowship, please go to the NSF program announcement.
DISCLAIMER: This is not tax advice. This page is largely anecdotal and has NOT been prepared by a CPA or tax professional. Though CPAs and accountants have been queried for their opinions at several times, no general agreed upon consensus has been met as to the one "right" way to handle the AAPF stipend and allowance. Treat this as a rough guideline, but please consult your own tax preparation professional. We cannot be held accountable for the information listed here. No one who has contributed to this page is an accountant, nor plays one on TV.
There are many opinions and strategies on how to handle the research allowance:
This brings up the question of what are allowed research expenses that can be paid for out of the allowance.
Also see this page for other ways to use your research fund.
You will soon find yourself familiar with the following publications:
State forms: These vary state by state. See below for some useful ones to consult.
"Form 1040. If you file Form 1040, report the taxable amount on line 7. If the taxable amount was not reported on Form W-2, print "SCH" and the taxable amount on the dotted line next to line 7."
This advice also applies to a 1040A; change this to line 1 for a 1040EZ.
|IRS Publication 970: Tax Benefits for Education||This form describes how to record taxable scholarship income, among other things. See Chapter 1.|
|Publication 505: Tax Withholding and Estimated Tax||Information on paying estimated taxes|
|Form and Instructions: 1040-ES Estimated Tax for Individuals||This has both the instructions and the coupons you need to send in with your estimated tax payments. Don't forget that April 15 is the FIRST payment of the new year, not the last payment of the old year. If you mess up and owe the IRS money you will have to make up for that AND submit your new quarterly payment on April 15.|
|Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts||This is the form to use if your estimated tax payments differ during the year, or if you only started making estimated tax payments mid-year.|
|Withholding Calculator||This is an online worksheet (they claim they don't record any of your information) that is supposed to be slightly more accurate than the worksheet in 1040-ES.|
When you make estimated tax payments, the government requires that you do so promptly each quarter. If the amount varies each quarter, they don't necessarily know whether you paid correctly, or waited until the end of the year to pay your tax. This applies to state taxes (if applicable) as well as federal tax! If your payment amount varies during the year, or if you didn't make the first payment or three (as is often the case for first-year fellows), you need to "annualize" your payments, and report this with your year end taxes.
Federal taxes: Form 2210, "Underpayment of Estimated Tax by Individuals, Estates, and Trusts" (instructions). Part IV is the key here. This form is filed with your year-end taxes.
State taxes: Generally speaking, you will have to file your return at the end of the year, calculate estimated taxes during the year, and, if applicable, justify your annualization at year-end. The following table may help, but consult your local tax code to make sure this is right. In particular, remember to submit forms from the right year! Most of these links are from 2005/2006. Also, remember that many states have part-year resident forms that differ from full-year resident forms.
|State||Year-end: "1040"||Estimated Taxes: "1040-ES"||Underpayment/Annualization: "2210"|
|AZ||Form 140 (2005)||Form 140-ES [instructions] (2006)||Form 221 (2005)|
|CA||Form 540 (2005)||Form 540ES [instructions] (2006)||Form 5805 (2005)|
|CO||Form 104 (2005)||Form 104-EP (2006)||Form 204 (2005)|
|CT||Form CT-1040 (2005)||Form CT-1040ES (2006)||Publication IP 2005(27)/Form CT-1040AES (2005)|
|IL||Form IL-1040 (2005)||Form IL-1040-ES (2006)||Form IL-2210 (2005)|
|MA||Form 1 (2005)||Form 1-ES [instructions] (2006)||Form M-2210 (2005)|
|NY||Form IT-201 (2005)||Form IT-2105-MN [instructions] (2006)||Form IT-2105.9 (2005)|
|OH||Form IT-1040 (2005)||Form IT-1040-ES (2006)||Form IT-2210 (2005)|
|TX||No State Income Tax||Zero||0 - 0 = 0|
|WI||Form 1 (2005)||Form 1-ES [instructions] (2006)||Schedule U (2005)|
Beginning circa 2005, the IRS opened the "Electronic Federal Tax Payment System (EFTPS)" that allows individuals and businesses to make tax payments for any IRS tax form; this includes 1040-ES (estimated taxes). It does not include state income taxes yet.
EFTPS allows you to make payments as often as you wish (quarterly, monthly, weekly) without having to pay a service fee for the transaction.
[Circa Dec 2007] I (Kurtis) have been using this for 16 months now, and have not had any problems or any audits, though I am coming up on my first full calendar year now; hopefully the "no problem" status will remain.
I've been making monthly payments (100% of my annual estimated tax / 12) each time my fellowship payment arrives. It is possible to set up automatic payments, but I'm not that brave. But, given the (so far) trouble-free nature and a way to avoid having to save money for a quarterly payment, I'd heartily recommend using the service.
As with all of this advice, be sure to check for yourself that you are making the proper payments to the proper people on time.
To learn more and to register, go to: www.eftps.gov.