 Good afternoon, everyone. My name is Ed Jennings, as Sam mentioned. And I'd like to welcome you to our session today. Sorry, I've got this thing on my screen here. The tax workshop, a workshop, Rackham Grad School 101, filing taxes for graduate students. I may say that's probably a bit ambitious of a title. But what I do want to give you a comfort is that we're going to be talking a lot about taxation of scholarships and fellowships and the best to report them. And that's going to talk a lot about tax forms and so on. The issues, and I think these are the issues that you can be most concerned about. I guess from an overview perspective, you should know, you're going to be looking at this as you're going to be bearing a significant tax burden that you may not have had in the past. And it may be a burden that's much higher or much higher, I guess, anyway, that most taxpayers see. Certainly, you're going to have to be responsible for more and doing your taxes than I do. I've been working at the university now for 25 years. As we go through this, if you have, we mentioned if you have any questions, this is the time to ask them. And I say, not just questions about, you know, the concepts and so what your own personal situation. I do get emails from time to time from people saying, Hey, I have a situation I'd like to talk to you about it. Well, unfortunately is the tax director for university. I'm not allowed to answer any questions for individuals, including President don't know for insurance and risk reasons, but this is the time you can ask so we're going to get into some very interesting topics, including fully estimated tax payments and multi state filing requirements, which you may have your own personal situation. So do feel free to ask. Okay, now I got them. In the next page. There we are. So, generally, this is basically the agenda as we go through this. The real question is, is there a lot of people are shocked there's taxable income scholarships and fellowships and we want to get you up to speed what those rules are so you feel more comfortable with that. And then once you have a tax liability, how do you pay that how does this happen how do I actually, you know, get this payment to the IRS. When am I supposed to do it. How much am I supposed to do and so forth. In which case we'll talk some about tax return so we take scholarships and fellowships and we put it on to the returns and you get a feel for how that works. And there's certain concepts we're going to talk about there which is filing threshold, the standard deduction and course different types of income tax returns. So then how do I pay federal and state quarterly estimated taxes and that's something you're going to have to do as well and part of a burden and we're going to talk about that. But this is something that you're going to not only have to identify you're going to have to pay the taxes in and you're going to have to do it throughout the year rather than the April of next year which is what many folks have done up to now. And then of course we talked about this earlier but there's multi state filing obligations first. You might have to file with a state you will have to file in Michigan, we have a tax regime, but you may because you were another states earlier in the year or somewhere else have multiple responsibilities for multiple states so we'll talk some about that as well. To give you the big to really start this out we really need to just talk about the basic rules. Now, this is for federal taxes that's the internal revenue code. The states follow the internal revenue code. If they have a tax regime, you'll hear about this as we go through Florida doesn't Texas doesn't Tennessee and so forth, but not too many. But here are the general rules and the states tend to file this as well. When it comes to the internal revenue code everything is defined broadly pretty much against the favor of the taxpayer. So the taxpayer is just about everybody individuals trusts the states corporations, the University of Michigan as well and we're a government entity. It's you on basically everything it's called an accretion of wealth, and you can see wages interest rental income cap gains. It would tax happiness if it could quantify so just want to let you know it's very broad in its sense. Now something we talk about is income tax and there are other tax regimes, one is so security tax and we collected from you from what you've earned, earned income, and then you'll get paid that when you get old enough to get that money back in theory. And the way it really works is of course the working generation supports the retired generation. So, you guys, you students will be covering for me when I get older, just as I'm covering for folks who currently retired. So that's it's sort of a may not be dollar for dollar but that's the theory of how it works. Anyway, that really won't apply here. I haven't seen it much with many of the scholarships and fellowships we've dealt with. So we're really talking about income tax and that's something to keep in mind as we go. That said, you do have a federal and a state. Pretty much they're going to tax you on the same income. Raising the question of why did we have a Boston tea party, but it is what it is something with federal taxes and this isn't always with states. You have graduated tax bracket and we'll talk about that in a minute but the idea is the more you make more you pay in on the same dollar. And they do this based on certain classification single married, you can be married filing jointly married filing separately. So the idea is I just want to accommodate you in many different ways and there is a preference depending upon what classification you like. For most individuals we file a tax return based on the calendar year end. It's 12 months. It goes from January to December. So we'll say well I got some money I really I only worked for 13 months well that doesn't go into one tax year that goes into two tax years, one month for the tax return, and then the other 12 months and the other tax return. You also are done on a cash basis that's how you're really accounting for your income. So if someone has said where you know you something is available to you but they haven't really paid it to you or made it constructively available to you. Then you may argue that it's not yet taxable to you not necessarily something that happens here but it is something to keep in mind, particularly when you get into estimated taxes. When did you really get the money. Because there's certain periods that define what quarter, you have to make the payments. Interesting concept here and this is for some countries but not all countries, the United States will tax you on your worldwide income. So, you go over Ireland, which basically has much lower tax rate, and you sell your art and paintings and so forth, and you're going to have to pay taxes in Ireland, because you're not. Then you come back to the US and they're going to say do your tax return you go I'm not going to put on the money that I made the gains I made when I sold the art, they're going to say, you have to and you're like well no no you understand. I, I already paid just to Ireland they go yeah, and you're going to pay to us to. And this is very important concept because you're going to see it in the multi state issues as well. And the reason is, but you're you're you're a citizen of the US and they tax you on your worldwide income we don't care where you are. And to the extent you pay taxes in Ireland will give you credit for those taxes. But if our rate is higher, then you're going to pay the difference in the rate to the to the IRS or to Treasury. So just something to keep in mind. But you'll hear this as we go, and you won't necessarily see it from a foreign perspective, but much more from a multi state perspective. And then there's a concept of you pay your taxes as you earn them. So if we give you money in February you're going to be paying taxes on that in the first quarter of that calendar year. And that's very interesting because we know I was a kid I always thought when you pay taxes it was April 15 through the following year. So they're called a tax debt, but actually you're paying taxes all throughout. And that April 15 date, that's a reconciliation date you file a return to say here's what I owe. Here's what I actually paid in. And the difference I either get back in a refund or I pay. And that's how it generally works. So these are the general concepts you're going to get pretty much going to talk about them as we go through this. Now, as we go through I think one of the most important things to know about is this income tax bracket again not all states do this so it's something to keep in mind. Michigan has a flat rate. It's a 4.05% used to be 4.25 they just changed it, and for the 23 year, and it's for all income but in this case with the graduating rate at the federal level. For the first $11,000 for a student you're only taxed 1210% for any amount between the 11 and up to $44,725, you're at 12%. So you can see same is just $1 more you go over 1101 $11,001 and that extra dollars now at 12 cents instead of that. And that's what they always mean when they say you kick me into a higher tax break. But that's basically the lay of the land. There's income there's income tax tables to use and there's actual calculations for brackets. It's your choices to how you want to do it. Most people take the, the tables. So let's talk about taxation of scholarships and fellowships again, despite the very ambitious title that we have. I wanted to make sure that something that we really just talked about are nuts and bolts, and that would be the taxation of scholarships and fellowships. Now you have to understand in the internal revenue code. Everything's taxable. Any kind of accretion of wealth that we talked about, unless there's an exception. And there is an exception code section 117 that talks about qualified scholarships. When they define qualified scholarships that means that there's unqualified or non qualified scholarships, and then they would be taxed so it's got to be very important to understand what's a qualified scholarship. And in this case, you basically meet the criteria, which is you're pursuing a candidate for a degree with the purpose of studying conducting it at the University of Michigan, which is an educational institution. And what actually is a payment a qualified scholarship payment is anything for that relates to tuition and fees and fees for enrollment or attendance a lot of times you have tuition and then they say, by the way, in addition, you have some fees. They would both be lumped together and they would be considered qualified scholarship. There's also incidental expenses that you come across when you actually have to buy books or supplies or equipment that's required for the instruction. And I was using example back in my day. They gave you a syllabus and the left hand column were books that were required. And then in the right hand column were books that were recommended. Well, basically the qualified scholarship only applies to the books on the left hand side. So that's that would then be considered to be qualified scholarship. Non qualified scholarship is everything else. And that's really a lot of times that's stipend we use that word stipend there's no definition of the internal enrollment code for that. And that's basically used to pay rent or buy food or anything along those lines. That's going to be taxable taxable income because it's not for your tuition. It's not for fees. It's not required as part of your course instruction. Anyway, that's taxable income. The general basis and we'll talk some more about as we go through, but I want to give you comfort there. And again, it doesn't include self employment tax. So employment tax is when you're working for someone or FICA, which is it be an employer. Self employment tax would be for an independent contract. And that would come up where they the grantor was saying you have to do this. We want this kind of work. We want this project. We want it by the end of the month. You have to put so many hours into it. You need to be working from nine to five. There's none of this restrictions with respect to the scholarship or fellowship you get so it's not likely. And nor have I seen it where it's subject to self employment tax or fight. I said, every once in a while, the IRS will send out notices on this case, and say you do owe it. And they do this for a bunch of students, you know, they just grab a bunch of them and they say you owe it. Well, I do want to let you know that is something that the University of Michigan would respond to, because it's a design flaw the IRS is incorrect and they're taxing our students. I'm going to ask about monetary prices and like awards that come from a writing contest, are those taxable. Yes, or moving stipend from their program. Yeah. Yeah, any basic that's a great point so you have to find a code section to get it out. There is a code section of prizes gifts and awards. And it is a, you know, your Olympic medal was taxable up until recently just to let you know, so chances are, unless it's the minimists, it's going to be taxable. And yeah, moving has been considered to be taxable so when you use prior to the tax cuts jobs act, there are exceptions and so forth and you might if it was truly moving. I don't know about that but at this point in time, it's taxable it's been it has been in place up until 2026 so if Congress continues it will continue I think they will, but they may, they may end it and bring back the tax free treatment to some of the expenses but right now moving expenses are taxable. Thank you. Anything else Sam. No, thanks. I would like to say everyone please change your name to the name that you registered with so that we know that you're here. Thanks. Okay, so that's income and that's very interesting some one question we tend to get from time to time to same if I just throw it out is loans. I got a loan. Well loan is not taxable and and the reason is you have to pay it back. So it's not an accretion of wealth over a period of time. It is for that short period you got it but over a period of time going to pay back it's not an accretion of wealth but that said if it gets forgiven, then in the year that it's forgiven it is taxable income because now you have an accretion of wealth, you don't have to pay it back so that's really the the opposite side of the coin when it comes to taxable income just to give you a sense. So now we got so so how do we okay so now I got this non qualified scholarship, but I identified it. And what what basically it considers because I've looked at what's curriculum and required and so forth. So now I've got tax liability I owe the IRS something. How do we get it there. And this is really part of the discussion we're going to have. There's certain forms out there that actually the IRS has, and they work with, and all employers issue w twos for their employees, and on the w to identify the tax liability, the taxable income the person earn, it'll compute the taxes. They also withhold the taxes. So basically, that's where I am in my situation, I just filed return April 15, because my taxes have been identified, the taxes have been paid, and they've been paid by the university, not me. If you're a non resident alien again this is a term by the code, that would be a foreign born individual who hasn't been in the US long enough to be a resident alien. There's a lot of advantages to that if you're resident alien you're taxed like a US citizen on your worldwide income. If you're a non resident alien often referred to as an NRA. You know, you can only you're only going to be subject to your you to tax on your US sourced income. That's by the internal revenue code. Your country your home country may tax you on worldwide income, much like the scenario we discussed with Ireland. But just the same that is that's you need to know what your classification is if you're foreign born whether you're NRA or not. When we get through this, we do have some slides on NRA is just to give you comfortable. If you get a 1042 us you are getting a form from the University of Michigan, you can call up payroll. They issue the 1042 us and ask them questions about. They also issue W2. So if you happen to be a GS or a during the year at some time, and you get a W2, you can call them about your W2. You can't call me about your scholarships or fellowships, because basically none of the forms here apply to us or apply to your situation. That would be as a domestic US citizen, or as a resident alien. This is the third bucket to 1099. That's what you should be getting. If you're a US, not non resident aliens, foreign born who haven't been here long get a 1042 us. Then that would mean everyone else should be getting a 1099 that would be US citizens and the resident aliens on years ago when this rule came out 1986, I believe. Treasury decided to issue a regulation that said employers and schools don't have to issue a 1099 for its students who are receiving scholarships and fellowships that that would be the non qualified piece. So you, you're not getting a form and that's the burden we talked about earlier. You, you students are expected to identify your tax line really quantify it and then pay it in. And that's basically what we're going to go through for the next rest of the time we have together. So, and that's the difference. So, now if you're a non resident again, your graduate student you get a scholarship and fellowship, the non qualified scholarship or fellowship will be reported on the 1042 US for you. So they identify it, the University of Michigan, and they qualify a quantified for you, and they pay a tax and again, you really had that, that April 15 deadline that you have to worry about, but no other. But if you were a US citizen or resident alien, you basically have to worry about identifying your tax quantifying your tax and paying it in quarterly again you got to pay it as you go. That's the earn it as you go theory. So that's where the hub of this presentation really focuses on. So as you go through this. Again, if you have questions feel free to ask. And there are a few questions. Does the stipend from the university talent as a qualified scholarship. Typically, the way the university works it from a process perspective, I'd have to say no, I think it's a non qualified scholarship that's taxable. If that's a question right. It is a it's taxable. And the reason is your tuition, which counts is basically wait, you don't get money for the tuition then you pay back you event. You just don't get charged for tuition. So if you're getting money, it should be used for basically rent and so forth. The only time you get to call it a qualified scholarship would be whether you spent it for any kind of expenses that are required as part of the curriculum, like certain books. So that's where it comes down. So basically, you know, the cash at the end of the year that you're getting in a stipend is probably going to be taxable income. And you just need to figure out whether any of those exceptions apply, but a good chunk of it, if not all that it's going to be taxable income. If I answered that. Thanks, Ed. Does somebody. Do we have to keep our address at the permanent one that's on our driver's license, or our local Ann Arbor address. That's a great question. A lot of these, that's a good question and something to keep in mind that we have at the very last page or IRS publications, and they're extremely helpful in this case, publication 17 will probably address that. My sense is, what's on your driver's license maybe from California or some other state. So you really want to let the IRS know where you are currently that said you do try to keep all your addresses current so it's something to keep in mind. But at the very end you'll see so a lot of the topics we're talking about will be. There's materials supporting materials, really from the IRS as well so they can help you get through this so we often get questions of what kind of resources can I use, and that happens there's also one on estimated taxes. Non resident aliens, and we have one on students student tuition. So it pretty much covers the gamut. So when any publication that you get, it's been drafted by the IRS for the IRS they're not too worried about your arguments or your opportunity to take, take exception to any of the tax and the link up items, in which case we recommend that you go to master tax guide and other things like that which can help you understand a little bit more of what's going on and give you various positions at the IRS doesn't again the IRS is just another party to a court case. They're not the judge, and they feel here are the rules but they're not going to tell you the side that benefits you. So it's very one sided, but it is pretty clear, at least as far as that's concerned so there is something but there's also master tax guide and you can always use Turbo tax to get through what you need. Same any other questions. Yes. paying taxes to Michigan is it quarterly or is it annually. Yeah, we'll get to that as we go. Okay, quarterly and painfully. Okay. If a student is a non resident alien, and they had a fellowship stipend from January to April, and then started working from May to December. What forms with that student need to collect. They'll probably get both 1042 s for the short period, January to April, because some of that payment will be non qualified to the extent it's non qualified, it'll go on a 1042 s. And then, once they start working here, whether you're for whether you're a non resident alien or not, you are an employee you'll probably get a w two, and as a graduate student or so, and then from may on you'll get a w two from the universe Michigan, the good news is they're withholding for you, and identifying your tax withholding and with the 1042 s, they're doing the same. So in that scenario Sam that individual probably just has to worry about the April 15th deadline the next Okay, unless unless they made money elsewhere but that's the idea, you know, so for stipends are 1099 issued and are they are people able to make deductions like as they were independent contractors. That's a great question. So, there's two concepts here one, the exception for scholarships and fellowships is why you will not get a 1099. And I do not believe a qualified for a independent contractor because you're not working for us it's not earned income. You are, and you'll see how that benefits you to some degree and in this case it hurts you because you're not your own business. If you were in business, you'd be subject to self employment taxes to. You're not subject to, and that's 15.3%. So at least you're not paying that you're just paying the income tax, but you won't qualify as an independent contractor, if you're receiving scholarships from the University of Michigan. Okay, thank you. All right, so the rest of the chat. So with the NRA's I'll pick up. So what's interesting is, you know, you get defined really by your presence here in the US and if you're here for a long period of time you can apply for a green card. There is a substantial presence test that the internal revenue code puts out. And it's basically if you're here half the year, you're more here than elsewhere. So we're going to make you file as if you're a resident alien and pay tax on your worldwide income. You can also do it through marriage. If you're a non resident alien, you're only taxed on your US sourced income. So you know if you're a non resident alien and you have tremendous amounts of gains from stock that you sold, that won't be subject to tax because you didn't get that from earn that while you're in the US, but the scholarship you did because you were here and you had the scholarship in Michigan at the University of Michigan. So you'll be taxed on your scholarship, but you won't be taxed on your cap gain from your stock. Again payroll will issue the form at 1042 s and they do a withhold of 14%, which pretty much covers the tax bill for the most part, but it all depends on how the tax return is filed. But again, if you have questions on a form, you can call you of ms resources, the department that issued the form is more than willing to answer any questions. And that goes back to the 1099 question, Sam, to the US citizens and the resident aliens, we're not issuing a form of any kind with a scholarship or fellowship. They're not getting a W2 because they're not working for us. They're, they're not getting a 1099 because it's not earned income. So I don't have a form so I can't answer your questions. That's the idea. Other than that I'm giving advice and again that's what's one of the principles we have is how we that's why we're here presenting now because we want the students to know as much as we can explain to them, and this is the only format we can do it in an educational format. What's interesting with NRA is as much as there's a presence test by the internal revenue code treaties override the internal revenue code. So there may be in your treaty your home country has a treaty with us. They may be a provision to their for students that says you're a non resident alien for five years or something like that, in which case you won't, you don't have to worry about being subject to tax and white income. And you'll continue to get a 1042 s. There's also an issue on FICA, which again, I bring this in its noise. People will ask the question. Again, as a scholarship or fellowship recipient, you're most likely not going to be subject to fight. The tax returns. You know, we talk about individual returns you're getting a W2 we talked about those well they all go into 1040. That's the form for individuals. Corporations do 1120 individuals do 1040 where they came with that I don't know, but there's two types there's the 1040 for the US citizen and the resident alien which is just a plain 1040. And then there's a 1040 and our for non residents. And they take the 1042 s and put that on there so multiple forms, and we will follow about a forms upon forms cups within cups as we go through some of this. Again, you can contact payroll be a question. We also have a pretty active very robust international center. They even have a software attack software for non resident aliens to help them prepare their tax returns for free. So my sense is do feel free to please do take advantage of the resources that they offer you here. So you will enjoy that. And that's probably the last we're going to spend a lot of time on non resident aliens. And that's because most of this is geared to us citizens and resident aliens again because you carry this tremendous burden. You now have to figure out whether you have tax, you have to figure out if you have tax how much, and then how you got to pay it more importantly when. So here's what we have is a quick quiz. And it's $50 deduction or $15 credit. A trick question. I'll just give you that in front. So what you have in the left hand column is really the formula to quantify your taxable income. How much income do you have what deductions do you have, there's your taxable income. What's your tax do you have any credits to offset the tax see credits go against the tax, the deduction goes against the income, and you'll see how that plays out. In the middle column, you take the $50 deduction. Well, 100 less 50 lives you leaves you with $50 of taxable income at the tax rate at 10%, it's $5 better than 10. And then you have no credit so you owe $5, but a credit it's only $15, but look how powerful it is. Now you don't get a deduction so you pay, you have $100 worth of taxable income at 10% that's $10, but a $15 credit wipes out that $10 because the credit goes against the tax. In this case, if it's non refundable, you don't owe anything. But if it's refundable you should get very excited about this. You get the five bucks back you get money back. Always a good thing when the IRS, or the government is going to give you money back. So that is the theme of I'm sorry how these returns work. I mentioned this because this deals with a credit. Now the problem is it won't apply to scholarships and fellowships and I'll explain to you why. So again, this is noise, but to some extent you're going to hear this and you're what's going on how I said credit I should get excited about credit. This is really for your education if you pay for your education and there's two credits ones really for undergrad ones for grad. The American opportunity credit is refundable whereas the lifetime learning credit is not you're more likely to qualify for lifetime learning credit. This there's a lot of information on this student financial services provides a form you may get the form you're most likely to feel free to reach out and ask them questions. They gave you a form, you can learn from them so it's not a problem. Now, I say you're not entitled to it because this is a, again, this is from an IRS publication. Now some of this is not current. It doesn't come out with the new, the new publication for 2023. They usually won't until probably beginning at 24. So you're stuck with 22, but 22 and 23 will read the same I promise you the rule hasn't changed. And you see you've got to go from through this flow chart and the second box from the bottom, where the same expenses paid entirely with a tax free scholarship grant or employer provided educational systems and tax free scholarship. To the extent that you have qualified scholarships, you're not going to be able to take this credit. That's what it pertains to the credits is how much did you pay for your tuition and non qualify and then the tax free scholarships are qualified that pertain to your tuition. And if it's tax free, you don't get to take it on your tax return that would be a double dip. You're not paying tax on it but at the same time, you get to you get a credit for so you're not going to be able to do that. And this applies I know this talks about the American opportunity credit, but this is a lifetime learning, and it has the same box. So basically you get a 1098 and you think it's a credit and you think it's going to work for you do do realize this may not apply to you. So what you'll get is a 1098 T that's what the form looks like from our financial services. And in box one is the amount of tuition that you've basically paid box five is the scholarship given to you. Box five at times can be equal to or greater than box one. Well five is a counter account. It reduces what's in box one. And that's what you'll find if you've got a scholarship for 20 grand. It includes room and board, let's say, including tuition and tuition 10 grand, then it'll be 10 in box one 20 and box five. And since box five is greater than one you're not entitled to anything. That's what I'm trying to say, but I just wanted to make sure you're aware of this and again this does have a flip result. Some people do pay for their education, particularly in the beginning part of the year they come here and they get a scholarship. And but they'll get a 1098 T for that. That first part of the year and if they paid for it, there's won't be anything in box five and they'll be able to actually take the credit so it can happen when you get it but that's how it works and that's the interrelationship with scholarships and fellowships particularly qualified scholarships and fellowship with respect to the 1098 T. Just to go a little bit further if you do have it you get to put it on an 8863 the IRS does not want to see this form. What they want to know is, can you as an individual pass this credit because there are further limitations on certain individuals. So if you're extremely wealthy, you won't get it anyway because it phases out over income tax brackets. The difference is, it's, it doesn't mean you're even titled to the full amount here, because you have to determine what you look like as an individual taxpayer to see what those limitations are. So, this brings us up to, by the way, I hope you don't mind my humor. It's all we have to go on other than that it's it's particularly dry. And I remember once my kids were young. As a parenting tool I used to make them read these presentations and they were only bad ones because they never wanted to read. And one time my son asked you always had these cartoons. And it's funny the further I go along the less funny they are and and that's actually probably very true. So I try to keep the funniest ones for the end but just to say, taxes wearing on you even with your sense of humor. So in this case, you're filing a return so now we got to return we've gone from I have income. I know there's no form for me again this is for the resident resident alien and us citizens. And now I've got to do it on a form which is I understand how's this work so let's talk some about the form so you understand that there's a filing threshold. And that just means, and you can see for single here if you $13,850 worth of income. So you get a deduction for that right off it's a it's a straight dollar for dollar deduction. So if you have $12,000 stipend nothing else for the entire year, you don't even have to file a tax return. Because you get to deduct 13,850 from the 12,000. And you're ahead of the game, because the 13 is greater than the 12. So you don't have to worry about a tax bond. You may want to file it though in case at anywhere along the lines you had some income tax withheld or something like that you would get it back it would free it up. But just the same that is what the threshold is it's an automatic deduction for you just breathing. That's all there is. You don't have to do anything for you get it just for just for existing. Now, there is an exception which I call noise because it talks about dependency. And this was really important prior to tax cuts and jobs act because back then, there were two deductions that made up this 13,850. One was a standard exemption and one was a dependency exemption and that depended upon whether your guardians or your parents could claim you as a dependent and if so they could take your return so they took that. The second of the two deductions on their return leaving you with just the one was a big deal back then it isn't any longer. But I wanted to make you aware that I say that to because many, many parents still have questions on this. So, and then there's these tests and the tests and whether you're a qualifying child or relative. And that's how you're going to be a dependent. It still applies to some extent because your guardians or parents may be able to take a credit on their return, because you are a qualifying relative or child. Chances are you're not going to be there's an age test under qualifying child. You have to be under the age 24. And there is an income tax income test under the qualifying relative, which means your income and that would include the non qualified scholarships has to be less than 4400 and it just doesn't tend to happen. So my sense is that's not necessarily going to be there but these are things you're going to hear about again it's not going to affect the calculation and we have a case study will go through it. But I want to let you know, they're out there. So, and someone asks if they are being claimed as a dependent. Does that affect how they file taxes. And if so how. No, in fact, I don't think generally it should. Now everybody has a different tax situation so I can only answer a question generally but here's the case study and I think it'll prove it out. If you're a graduate student, you're single. And so we use the 13, 850 standard. The amount of stipend you got was 14 to 50. You're a US citizen, which means you're it's not only 1040 to us or nobody's in any withholding for you. And you have no other income you work solely on a scholarship. Now at 23 theoretically you could be a dependent or not, depending upon whether you made that test. Well, the return would look like this. So this is one of our 1040 looks like a lot of a lot of stuff going on. Got the name Jane up here. This is where you put all that information your security number. A lot of this you're going to pass because these are dependents and so where you don't have any dependents you're single. The scholarship you put online one by the way that helps. And in this case we talked about it in case today 14 to 50. The deduction we know is 13 850. Now I apologize this is still on a 2022 form. But again, it would be the calculation would be the same. In fact the 13 850 is the 23 standard deduction. So think of this as a 23 return. So you get to deduct 13 850 from the 14 to 50 and you have $400 worth of taxable income. That's all you have $14,000 and you only have 400 of taxable income. And then you have to figure the tax which is 10% we know from the bracket. So it's 40 bucks I owe 40 bucks. And the best news is and we'll talk about this when we get the quarterly estimate tax payments. But because it's under $1000 you don't even have to do quarterly estimate tax payments. So all you have to be concerned about is filing this form, April 15 of the following calendar year. So good news. And this happens, you're entitled to this 13 850, whether you're dependent or not. And the reason is and it's in pub 17. The only time they consider this 14 to 50 to be earned income is when they look at the threshold that you get to use which is 13 850. So not to confuse you but bottom line is is and if I am confusing I apologize but bottom line is is if you are dependent or not you should still be able to complete your return the same. It should look the very same. So that's why it's noise, much to do about nothing in most cases. So that's the idea. Great question. Now we go to another case study. And this comes down to the identifying the taxable income and the one scenario my postdoc, I get a stipend of 15,000. Okay, it's clear and I'm a US citizen which means I don't know what's withholding for me. And I'm using it for rent and other living expenses meaning it's non qualified scholarship. In the second scenario, it's a little more confusing. I get a grand award of 25. I then have to use 9,000 to pay for tuition. That's not what we do here just to let you know it doesn't work that way, but at some schools it does. And then I also have $1,000 which I took out of the 25,000 to pay for books and so forth that were required as part of the curriculum. So that left me with $15,000 much like above for rent and other living expenses. So is the 15,000 taxable income, or is it less or higher? Do I show at least in the second alternative 25 on the return and subtract out the nine and the one to show them 15. Do I show them the math, or do I just do the 15. If that's the taxable none. Again, you've seen this tax return looks very similar last one. We start with 15,000 and they're like in a line one. It's not a wage, but it used to be put in other income, which is the only other earned income age. And they had a lot of questions with that so they like us to put it in line one and they've been that way for the last 10 years or so. So you subtract out to 13850 because you're single, and you get 11150. And then of course you take 10% of that and you will 150. And you'll notice, again, we'll go through it again. This is for both scenarios. You're $15,000 is taxable income because it's stipend that's not for tuition, and it's not for the books that are required as part of the curriculum. In the alternative scenario, you had 25, and you already subtracted out what would be qualified, leaving with a non qualified a 15 said differently, all the IRS wants is what's non qualified, I just want your taxable amount. How you did the math. Maybe you made a mistake right maybe put 2000 down because you didn't keep the receipts and it's really 1000 and IRS comes out to look at it you don't have the you can't prove it you're all worried. Yeah, guess what, that's exactly what the IRS says we're going to put that burden on you when we come to audio you better be right. But other than that, you don't have to show it to me, I don't, I'm not really going to be looking for it. I'm just looking for that bottom line number, which in this case is $115. And again, since it's under 1000, I don't have to file any quarterly estimated tax payments. So I'm only looking to do taxes, April 15 of the following year. And if I'm getting money back I want to do it in January because I get it earlier but just the same. That's the scenario. Now we're going to go ahead and I'm sorry. Speaking of quarterly is the 13850 a standard deduction for the whole tax year for each quarter. Is the I'm sorry can you restart again. It says is the 13850 a standard deduction for the whole tax year. Yes, the tax quarters. It would be nice if it was quarters. When we go to do your quarterly estimated taxes, what we do is we tend to do it annually. And then that's where the 13 comes in. And then you come up with a liability number and then divide by four in theory. That's what you do. But in this case, you're going to find that the 13 of the standard deduction is for the year, not for the quarter. So, and the IRS would not take kindly to the fact if you took, if you took it on that quarterly. Sorry, I don't think it's funny, but they, they get particular about certain things. Any other questions Sam. Not at the moment. Okay, good. All right folks will you seem to be doing rather well with this so certainly if you have any questions and as you go along it's fine. The more time we have at the end we can handle your situation. So that's fine too. So now we talked about okay I've got a tax liability. I understand what it means I know how it goes on a return. Okay I get it's my responsibility, and I got to make these what are they again quarterly payments what's this about. So that's the idea you're going to have to every once in a while, four times throughout the year, sit down and figure out what your taxes are, in addition to that April 15 of the following. And this is just how it works. You can figure it out at the very beginning of the first quarter and pay it right then and there, all of it, not have to worry about paying it for the next three quarters you may forget you don't have to worry. You may say I figured it out the first nothing's changed. So you only have to figure out once and then pay it over the next four quarters the first one when you figured it out the next three. You have to handle it. It's up to you. You can pay in early, you cannot pay late, and then we'll talk about that. And of course this is supposed to be funny, but no one finds this funny. And it, the whole thing is very confusing and I think part of it is, it's not even structured well. They talk about four quarters, and you would think each month, every each quarter is three months. It's not. The first quarter is the second quarters to the third quarter is the fourth quarters. So it just doesn't work right so that's just how it works. And the dates are different. So you can see that with even at the year end January 16 if you file your entire tax return by the 31st then you don't have to make a, a payment for the fourth quarter. And that's, IRS feels that that's a very big exception to me what happens to most folks are sitting here now going, oh my goodness, I didn't know anything about this. I haven't done a quarterly estimated payment for this year. And that is something that you're going to need to do. And it's due. If you started anytime from July on, and you're going to have to, because it's a June payment in August so you're going to have to make a payment. Either September 15 or January 16 and I think that's part of the reason why Sam and Paul scheduled this early enough so you get time to make sure you get this. There are sometimes we have it in March for the year end, and we talk about it and people realize they hadn't done the quality as many tax payments the year earlier, and that's not very helpful. So part of the reason we're out here now is to make sure you're aware of this. And the way you do it is you pay it on a form 1040 because that's the form. Yes, for as many taxes. And you have to put your social security number on it now you can do this electronically now so it's not even like a form anymore it's very easy very straightforward. What's interesting again, we've talked about the Fed government and the state they both tax you on the same dollar so you may have to do quarterly taxes at the state level. I've never heard of Michigan being particularly difficult about that. I will tell you the federal government's very good about sending out notices. And many times in certain cases anyway, they can be incorrect so you want to make sure if you get something from federal government. Not only that they really charge extremely high interest rates. So if they feel you should have paid it you didn't you can really get hit with a large penalty. What scares me is of course, you have non compliance with the IRS, there's buckets, there's the in bucket and then there's the audit bucket and you want to avoid the audit bucket so they they could, they could very well decide that the fact that you can't do your taxes correctly is a good reason to come out at you. And so you do run that risk so you want to make sure you pay attention to this. And I don't know if anybody's made the payments yet if you haven't yet made a payment you might want to start a little earlier just before the date require just make sure you can get it done appropriately. And how do payments work. If folks are beginning in September. And so they don't get their first stipend stipend payment until then, someone asks, do they not need to pay until January 16. Yeah, I think that's correct. Now again, we come down to cash, because cash basis determines when you received it. And if you said I couldn't get it till September 1, well then you fall into that bucket. If you get paid August 31, you fall into the third quarter, which has to be paid by September 15. So it would be nice. Now you can't go tell somebody they go here's the check you I don't want it to September 1 because theoretically it's yours. But if the payment date is that date or they say we'll issue these on the 31st and they don't get to you to the first, then it falls into that ladder quarter. And it gives you that much more time. But all it does is what quarter does it go into and again it's the first three months and March 31 is it. And then it's, and then June 15 means it's April and May, so it's May 31. And again, that's where the two months come in. And then they go back to three months. June, July and August, and that's what brings you up to September. And then it's from September on the five, four months there that gets you through. So that's how it is. So that's a good question. I think a lot of it comes down to facts and circumstances, but basically it's time value of money. So if you should have done it in the third quarter and did it in the fourth, and the IRS comes out and audits you and figures out it's been earlier, they'll hit you with penalties for the difference between what they could have earned an interest which they seem to think is a lot higher than it was. And from the day you didn't pay it when you should. That's the idea. If someone hasn't paid the past two quarters. Could they pay for them for the September deadline. Oh, yeah, in fact, if you miss it, if you miss it by a day, pay it the next day, because the penalties run by how many days are outstanding. So you don't want to wait any time. If somebody goes in and goes, you haven't made your payment yet. No, no. Well, should have done that April 15. Oh my goodness, what's April 18, I guess it's too late. It's never too late. Do it, and you're only three days late. And the penalty may not even depending upon how much your tax liability penalty may be a dollar, send it in, get it done. If you hold on to it, the penalties will be higher they accrue down. Great, thank you. Then one. Okay, so in this way. Just to recap for NRA is only yearly as possible, not quarterly with a due date of April 15 14% tax will be automatically withheld by the university when the stipend is paid regardless of being a GSI. And the forms that they would need to fill out is our forms 1042 s and 1040 in our W2 will be provided by the university close to April 15. Well, that's close. So we'll review this again. It's a good recap. So if you're not resident alien that scenario is where you have both a stipend for a period of time and then you work to university mission, you're going to get a 1042 s from the university mission. You don't complete it. They do. They'll withhold for you. When you've worked as a GSI for the rest remainder of the year, you'll get a W2 from the University of Michigan. You don't fill that out. In both scenarios, they do everything for you. They identify the tax liability, they compute it, and they withhold for you. And then all you have to worry about is making that payment the following April 15. And it's always good when you have different things coming up like this to make sure you're covered, but you should be covered from that scenario. So, and it depends. But the same. So sometimes, you know, you have the W2 when you say, I want, you know, you know, you have to fill out the withholding statement and how many you want to know how many with. And the higher number you put in on the W on the W4. So they're called exemptions the higher you do the less they withhold. And if you have a lot of deductions, a lot of things going on in your world, you have a lot of different businesses, you're going to say this scholarship. I'm really not going to be taxed on this at all, or you're married, and your spouse is very active and has a lot of things are over withheld. You don't have to withhold here. I don't want anything withheld. So you can put down like a 10 in which case you put a 10 that I can withhold on your scholarship or fellowship. If you put a zero, they're going to withhold the highest. Well, so Sam, even though we're saying they're going to withhold for you, you still determine how much payroll is going to withhold. So if you tell them, give me everything now and taxes, don't withhold anything. And then you go to file the tax return next April 15, you may find out that you owe a penalty because you didn't pay it in as you go. So you have to make sure that you and you you determine that you're making sure that they're withholding enough as they go. That's the idea. I keep mine to zero and I get a refund every year, which is they call, you know, taxification, right? I mean, I get all excited about something for a moment till I realize it's my money I'm getting back. But the idea is you do have to make sure you're managing your own withholdings. But yeah, the summary is not bad. I don't think you necessarily have to worry about estimated tax payments because any and all monies you're getting has been gone through where someone's giving you a form for it and done a withhold. So you should feel pretty comfortable. You may want to check it just to make sure but that shouldn't be a problem. And with estimated taxes we'll talk about this in a minute but you only have to pay in 90% of the amount. That means April 15 next year, you get to pay 10% of the total liability and you still won't have a penalty. So you still have some wiggle room, so to speak. So that's a good recap. Thank you. There are forms that we that students need to seek out themselves versus the forms that the university provides. Can you remind us which ones we need to seek out ourselves? Well, I think you got to do a 1040 ES. I think you got to do both fed and state, I suppose, and then multi-state again your subject have to figure out how to do that. But I think that the interesting thing about forms, and again, if you any kind of form you need if they give you a 1090 AT and you have to do an 8863, it's going to be in the instructions and so forth. So you're going to find a lot of this. So it's very intuitive and they tell you that they want you to be able to fill out your taxes quickly. They want your money. They're very good about telling you what you need to do. And I think it's just a matter of where to start and what do I need to do to get there, which is more or less some of some of the other stuff that we're going to talk about. But do look at publications because even just glance at them, they're very helpful. And the 970 is about students and student benefits, and it's going to talk about the 1090 AT. It's going to talk about scholarships and taxation scholarships and so forth. So do feel free to go through that. And I think a lot of what we're talking about will come back to you. But something about tax too, by the way, you don't, you never get it the first time. It's called a ripple effect. You get a little bit the first time, then you hear it again, you get a little bit more. And over time, you're like, yeah, I think I got it now. Also as a resource, if you can talk to each other, I mean, you're both on the same boat. And someone's going to say, I thought you could do this. I thought it was this way. And you find out it could be both or neither. But the bottom line is, is you're going to work with each other. You're your own best resources. So feel free to share. Thank you. So how do I, how do I even do coalesce my taxes? And that's why that the question that came back on. Do you get the standard deduction quarterly or annually? Here, what's going to be your annual income? How much do you think you're going to get stipends? You pretty much know what you're going to get. And so that's the nice thing. Then you apply the standard deduction 13. And in this case, it's the, we're down with, after you subtract out to 13, we are at 14750. You do the tax on that, that tax, 1,000, 550 is over $1,000. So you do have a quarterly estimated tax obligation. So then you say, okay, well, then that's where the 90% comes in. I really only need to pay in 1395 throughout the year. And that extra difference I can just pay in April 15th of the following year. And you can claim that way. And then I can only pay in, I'm only going to pay in what I need to pay in. And in this case, they have a, we have a quarterly amount. So you come up with 350, 349. But the idea is, you can manage this any way you want. You can pay it, you can pay the 1550 right in April of 23 so that you don't have to worry about the rest of 23 and you're comfortable and so forth. So you can manage it any way you want. But this will give you an idea of what you owe. What's interesting and not only do you have to pay this in, when do you want to pay it? There's a budget issue. You thought this whole thing was tax free. When they gave you this amount of money, you thought it was all yours. It's not $1,550 can't be spent at the bar or paying rent or whatever you want to do. It's got to go to the IRS. And there's also something that possibly may have to go to the state as well. So something to keep in mind. It's a budget perspective as well. All right. I'm going to move on Sam if I can. Any questions. Yeah, and someone has two different scholarships for the year. Do they put the total amount on one form? Do they need to develop two separate forms? That's an excellent question. Yeah. Scholarships, it depends what, you know, if you're a non-resonant, you get 10, 40, 20, and if you're a U.S. citizen or resident, you get nothing. But the tax return, there's one tax return for 12 months. Those 12 months pretty much calendar year, January to December. So all the money you make in that time period falls into that tax return. So it's all one big bucket as far as IRS is concerned. And that also includes spouses. So to the extent your spouse is making money, they're also being withheld. And they can just go to work and say, Hey, payroll, can you withhold a little bit more for me? That way you can cover my spouses taxation on scholarships and fellowship. So that's another way to shift the burden. But the bottom line is it all goes on one return and whoever you allow on your tax return. You know, that's where you're married filing joint. And you can do that if you like. So there's a lot of different ways that you look at the return and to manage it. But all your income for that tax period goes into one bucket. So it's a very good question. Do know the IRS is having enough trouble with the tax returns as they are. They don't need to for one person seeing how they're they're shredding what they have. So anyway, here's what a 1040 to West looks like. And again, it's not a whole form. It's just enough information to tell the IRS who you are and how much you paid it. By the way, again, this was in the old days, you had to mail this in today. It's much simpler with the electronic filing. And all I asked you to do is keep receipts. I think you're going to find that the IRS will many times take your money but forget you've paid. So they come back and go, we don't have any record of it. So you need to keep records because they don't. And you'll get to respond to them and say, Oh, yeah, you took it from me. And they're okay about that, which you explain it to them. But we do see a lot of times they I've never seen them come back and say you overpaid. We don't have any evidence of this, but they do usually say you're underpaid. So something to keep in mind. And this again this comes out on IRS publication. This is to help you organize when you have to pay it what the amount and this is all to help you be organized in orderly. And the IRS wants that because the more organized you are the more time you're going to pay and they want the money as soon as possible. So that'll help pay the interest we have on our trillion dollar debt problem. And then you say, Okay, fine, but I forgot one of the penalties. All right, there are penalties. And it's interesting, if you paid in 100% of last year's tax, you're not going to have a problem. Now that tends to happen. When you got to raise this year, $20,000 raise, you can pay in last year's amount and keep the tax difference until April 15th of the next year. That's the same value of money. It doesn't really impact me and people at my level, but if you're very wealthy, it can be something that's a lot of money you can earn interest on in the meantime rather than have the IRS earn it so that's the idea. But one applies more for us is the 90%. That's for everybody. And as you go along you find out that you did your taxes wrong you thought you paid it all in you didn't, and you always small amount. And then 10% of the total liability, you're still not going to subject to penalties. That's the wiggle room. And again, there's the exception we mentioned, if the entire amount that you owe is less than $1,000 they're not going to hit you for anything anyway. So, and don't be offended, but the rationale is is that $1,000 doesn't do anything for the debt we have to deal with. So you might as well hold on to your money because you're just making more paperwork for us. And that's more administrative time. And by the time we get your 1000, we spent 3000 to get your 1000. No, thanks. Keep it and give it to us the following April. But that said, they do want it the following April. Now I'm going to get up to multi-state issues but before I leave that, Sam, any questions on quarterly. Specifically quarterly. No, you've been very. Thank you. And I want you to know, you know, it's a thing of confidence because you haven't done it before. It is just basic math. And a lot of times it's always going to be something you forgot or whatever. And again, that's where you check each other's math. It's like anything else. And it's really, I found it to be extremely helpful. I found students to be to really manage this burden. I've been very impressed over the years done this for about 26 years. And I've been very impressed with how students have been able to manage this. This could be a high anxiety at the beginning of the session. And by the end, they feel better. And by next time we give it, which usually back in March and although a lot of the same folks show up, everybody feels pretty comfortable about whether the situation is so kudos to students. I think you are as bright as people say you are. And the test of that is handling taxes and you do that well. You bury. I've always found this extremely funny because when you read through the stuff you will find it. It's not, it's not simple. It's not meant to be, but it's not simple. And, you know, the worst is I've been doing this for so long I start talking like what I'm reading and that's a problem too. So, but just the same. What do we have with states, what do we have with states. Well, pretty much if you got a filing requirement for the Fed you may for the state. If it has an income tax regime. And as I mentioned, most states do. So you got to file a state return. And again you'll be paying tax on the same money that you paid to the Fed government is not as not as if you get an exception for that. You may have a situation where if you've been in two states at the same time during the year and made money, you may have to file two returns, one to each state. In addition to the Fed return. And again that comes down to this is always a very interesting topic. Well, how's this work. What does it mean I was in another state well and we'll get into this but domicile is very important. Where do you really believe your home state is just like when we talked about home country on worldwide income, and it's basically turns on intent. So that's very important to keep in mind because that's up to you folks to be able to define that. And so what we're going to get into now is when you start doing your taxes and we saw some of this with poorly estimated taxes. When you start walking out on a plank, you're responsible for your own tax situation, and you're in a position to be able to make the decisions you need to make that really determine what it is and if you make the wrong decision. You'll get hammered with penalties and so forth, and they won't take any sympathy to you because you had the power so to speak to make that call early on. They believe if you're responsible you need to manage it right. So, but at the same time, it's also planning. If you do it appropriately. You doubted the eyes and crossed the T's you're good, but it is a it is a an issue that when I say it's an additional tax burden it's truly your burden. So if you're multi states, how does that work right I mean I get iota fed and iota state of Michigan on the same dollar that upsets me enough. But is that I got two states are they both going to tax me and we'll get into how your home state taxes you when your worldwide income just like the Fed. And if they're going to tax you a worldwide income. What about Michigan. I mean they're taxing me to just like the Ireland situation am I getting tax twice, and then how does that work and as we mentioned, it's pretty much the same. If the state that's actually your home state is actually going to tax you in many cases, depending upon what situation you want to do. If you want to continue to be a resident that state. Yeah, you may have to pay in the difference and we have an example to that shows that so anyway there's a lot here. But do take, take comfort the fact that we do try to avoid double taxation between the states on the same amount of money. And either you leave from one state and go to another and we cut it there it just doesn't happen to be doing the calendar and, or we have, we you stay as a resident of your home state, and then we have to make sure that if you're paying to both states there's no double tax. So that's the idea. You'll feel comfortable with that. Now one of the good news about filing in Michigan, and I think you will all have to file Michigan if you've got a scholarship or fellowship payment. Because it's, it's Michigan sourced income. It doesn't matter if you're non resident alien it doesn't matter if you're a citizen of California, you got money in Michigan. So you owe tax to Michigan, on the extent of that money. Now if you're a Michigan resident you're tasked on your worldwide income. But if you're not, you still have to pay to Michigan as a non resident on the Michigan source revenue. Good news is there's a credit recall Michigan homestead exemption, and it is a refundable credit so you should be very excited about this. And it applies to students you don't have to necessarily own property just rent property, and I think you'll see as you go through. There are certain advantages that the issue is you have to be a Michigan resident for at least six months that comes back to. Well, I've been in the state for seven months, but I really want to be California. Okay, that's fine, then you're not entitled to it, but I want to be I want the credit well do you want to be a Michigan resident. I say yes and we say well what's your what's your domicile, what's your intent. They just have to back it up. So did you, if you're in Michigan did you change your driver's license and that goes back to that address question. Did you do you vote do you vote Michigan or do you vote in California. I keep picking on California because they have a higher tax bracket than Michigan. So you whatever you're paying tax on to Michigan on that income the stipend, you will pay additional tax to California on that same stipend. And that is double tax, and there's nothing you can do about it because it's a higher tax bracket. So, bottom line is, you want to identify the states that you're in, and to the extent your home state has a tax regime and it's greater than Michigan's you want to change your residency. And changing your residency means your lease, your bank accounts but more importantly your driver's license and voted. These are these are pretty hardcore documents that prove that you may you moved, and you change your residency. The fact that you change your residency is independent of any other independent or dependent type of determination that we make here at the universe Michigan so you're faster for financial aid. You can still be a non resident for faster and a resident for tax. It's not connected it's not related. That said, if you walk around we're in a Michigan Jersey thinking that means means you've changed your residence that won't be enough. I just want you know, it has to be a little bit stronger. But if you are a Michigan resident you could be entitled to the exemption. So your case study $8,000. Now, for Fed, that means no tax right $13,000 of a deduction, but here, that's not how it's going to work at Michigan. No other income was earned. The students not claimed as a dependent by anyone else. And as Michigan resident qualifies for the homestead and this is great and this is what the Michigan return looks like. You see the box there in line eight residents, and you see online nine a one exemption so you get $5,000 of a deduction, not not 13 855, but against the 8025 you owe 3025. And the tax on that is $123 and what we have over here in red is the fact that again this is a 22 form. It was at 4.25% and this year for 23 they dropped it to 4.05. And that's what we're that's what we're trying to show you. So this is a 23 calculation on a 22 form. They have yet to come out with 22 form. So over here the second page you got 123 that's what you owe. And then they say do you have any credits and you go well yeah I did do I have a property tax credit for 425. And that means you get $302 back. That's the refundable credit. Good news is you thought you were going to oh, in fact the state of Michigan is giving you money. You know Michigan doesn't like giving money to people. So they have a website that talks about this and it's not very generous to the as far as interpretations toward the students, but you may want to read it just the same. So you feel comfortable about it and you get to be able to make sure you got your eyes and cross your T's. So these are the cups within cups that I was talking about. If you deduct that number 425 were to come. Well, there's a homestead form that you got to fill out. And this can be convoluted convoluted but it basically how much you're paying and rent. How much did you earn certain percentages taken to both. It turns out that based on this calculation, you're going to take $425 as a credit which ties back to what's there online 25. And with that attachment. They're also going to ask you other questions as well but just the same you might have other forms so the question was what kind of forms do you need. Those forms will come through to you on the instructions they'll tell you exactly what you need so you can complete the form. So that's if you're a Michigan resident now we're at the non resident piece and there's one or two things, either you, you were in another state at the beginning of the year and left it. If you're a Michigan resident, or you have stayed you keep your residency and say you live in Michigan but you still consider yourself a, a resident of your, of your home state. Now, if you in the first year you have that either scenario you're filing to both states, you're filing a return to the state you were in, and you're fine to a state you move to, or you're going to file to a state you continue to keep your home. And you're going to have to file Michigan you always going to have to file Michigan because you have Michigan sourced income. But in the latter scenario where your part year resident, and you, you move from one state to another, you just calculate that first year's return based on the months that you were in, or the state that you were in the other state. And then, then when you moved to Michigan, what goes to Michigan. So it's going to be a year's worth of time, but split between the two. And the second year, if you can continue to be a Michigan resident, you only have to file the one return, Michigan. If you choose the non resident scenario, that's where you're always going to be a resident of your home state. And you're only going to pay and then you then you're going to be a Michigan and non resident for Michigan forever more. Now, that's not desirable unless maybe you're in a state that has no income tax regime like Florida. I would continue to be I continue to keep Florida is my home state I'm not paying anything Florida that way with Michigan I'm only going to pay tax on my non, or my Michigan sourced income, not the full amount. Now, the students have a lot of other monies I suppose I suppose you may we've had some scenarios with some students have come up with questions about their schedule case and their cap gains from big investments in their rental properties and others, not so much. So the idea is, it's something to keep in mind but it's more personal to you. Again, when you go to change residency. It's based on your intent. So if you said I changed fine the more evidence you have to back that up stronger your position. And if you want to be a Michigan resident take that real property or the property tax credit, the homestead exemption. You're going to have to prove you've been here six months and you're going to have to prove your domicile that was your intent to domicile be here in Michigan, and that's again drivers license voting registration bank accounts, lease arrangements and so on. So, that's the idea that's the hub of it. So as we get into this return we have a case study shows as well. You get a $30,000 grant from NIH and $70 of interest income we haven't really dealt with this before this is that additional income. This is very important because if you if you take one scenario in Michigan the US the Michigan sourced income is only the $30,000. So if you're a resident of Massachusetts, and you're not claimed as a dependent and that's important because dependent does apply at the state level, and you can see if you're dependent. Somebody else you, they may claim your exemption you don't so it all depends what the state law says, do know the tax rates differ by just under 1% isn't salad much. Okay. So here's Michigan return. It should say now in residence sorry I think that's a misprint. We've got 30,000 we take out the 70 because that's not in Michigan, we're only doing Michigan sourced revenue. Then we do the 5000 deduction we get the full 5000 because most of the income is in Michigan so we get most of the exemption, which leaves us with 25 and when you do the tax on that at the just the 4.05% you get a thousand 13. So just over $1000 worth of taxes is owed to Michigan. Now, again, you break it out and you show where total income. It's 3070 only 30 in Michigan and then 70 to the other state, and that's really determine how much of the exemption you get. Then this is to show exactly why you're pulling out what are you pulling out what kind of income is it that would be to that other state. It's if it's more of the scholarship that belongs in Michigan and that's what they want to know. And in this case it's interesting come and view of a home state in Massachusetts. That's where you earned it. So basically, that's your $70. And you get to deduct that off the Michigan return because Michigan only gets to tax Michigan source revenue. Now this comes through and another another piece of it to just basically confirm what you're doing. Everything's good. So now we get to Massachusetts you're finding two returns now. Massachusetts says, well, let's start with the Fed number 30,070 because you always start with the Fed number. In this case, your exemption is 4400 more generous may I say that Michigan, well, I guess Michigan's up to 5,000 so we have we just changed that. So now you got $30,070 you see what breaks out and the tax on that at 5% and that's line 21 at the very bottom is 1,504. So you owe to Massachusetts 1,504, you just paid 1,013 to Michigan. And now I got to pay 1504 to Massachusetts, that's double tax. And Massachusetts says yes but what we'll do is give you a credit for what you paid. So we won't do basically you don't have to pay us the full 1504 just less whatever we the difference of what you paid to Michigan. So you go all right well I paid 1,013 to Michigan they go okay so you always $491. Wow. But I paid Michigan attacks on $30,000. It was only the 70 that I didn't pay tax and you go yes, yes it is, but I'm paying $491 on $70. And you go yes, that sounds like that's terrible. Yes, it is you should have changed your dumps. So that's the way this works and I think that is unfortunate but you have to know your, what your intent is your domicile, you have to know what home state you want to have, and whether it's worth keeping from a tax perspective. Again, if you change it, you change your residency it's independent to any other type of legal issue that you have with respect to your residency. So it's just for tax purposes and tax purposes only. So, but in this case you can see you pay 491. Whereas you would only have paid probably, let's see 4% on $70. So you're talking $105. So, you know, clearly, you want to look into this and it was only a percent difference California is ridiculous it's much higher. You want to look into this. But again, if you come from a home state that has no tax regime, you don't want to change, because Michigan won't ever tax that $70 they'll only get the tax to 30. Now, that doesn't sound like a lot, but next year, it could be a lot. You could get a huge distribution and a cap gain or something like that. And Michigan won't be able to tax whereas Florida won't because they don't have tax regime. So that's the idea so something to keep in mind you got to know your own finances and how to work it. And you need to know you need you are responsible for building your own case to be able to defend your position. Should you get asked about it. That's the idea. And we have a few questions. Um, does someone qualify for the homestead if they've been a resident in Michigan for six months by the tax day, or does it have to be six months by December 31. Tax day, meaning April 15, the following year. Yeah, no, you it's a calendar year thing. So for the six months in this calendar year that you're actually completing your taxes. So, if you've got here in September, you won't qualify. You only be four months in September. Yeah. And so someone works for a company. Thank you, by the way, who's helping provide tuition assistance. And under section 127, they know that that they're able to provide 50 to 50 and tax that's tax free. Do they include that on their W2 or will the company handle it on their end. Well, that's a great question. What what'll happen is it won't go in box one on your W2 for taxable income. There'll be a note though in one of the boxes that says, here's why we did make a payment. Sometimes it's not subject to tax. So it'll be identified, but it won't be taxable income. And importantly, the state itself should follow that as well. So, um, code section 127, so you should be good. Okay, thank you. Someone believes that the state of Michigan and the state of Illinois have a tax agreement that allows them to file only one taxes for one of them. If they intend on filing their taxes as a resident of Illinois. How would they go about doing that. Yeah, that's called the reciprocal tax and we have it with all the border states, including Minnesota, which isn't much of a border. But you it's hard. You typically see the employer do it because the employer has to do the withholding. It's much more difficult for individuals to qualify for, but they could. It's just a lot of people. Some people feel it's easier just to, particularly if you're part of your resident, you're only going to file it to one state you file it and you're done. You're going to need to do that to some extent because trying to explain your scenario is because Illinois tax rate is I think very similar to the tax rates are very similar. So it's not like it's a huge benefit to get one over the other. But my sense is we have done it. You can do it. You're entitled to do it. But if you're doing it as an independent as an independent individual rather than your employer doing on your behalf, it can get to be very complicated because you have to make payments to your state agency. And and that's and that's what they're just going to pretend is if the person stayed home and they didn't go anywhere. So it can be it can be rather challenging. But I'll leave it up to them, but reciprocal is what it's called reciprocal states and there's usually a phone call will probably get to most of what you need. Rather than any you'll do some research, but my phone call will get you where you need to be. I think. Thanks, Ed, we have a few questions about quarterly. Someone and their spouse have been filing jointly and they square up in April. But now that this person has to file quarterly and their spouse is still earning only a W2. Do they as a couple file quarterly or does just the student file quarterly and then they square up at the in April once a year still. Yeah, so my sense is, when you have if they're filing jointly, then it's their return. And you could have a situation where the one spouse who has withholding withholds not just for their income, but for their spouse's income as well. They just ask payroll to increase. They're withholding it 10% make it 12% not 2% covers my spouse's tax on scholarships. So the idea is you can shift it that way back and forth. Then if reconciliation on the, the catch up if you will come next April 15th. I don't know if it's a situation where you know how that works. I don't know what they mean, whether they mean catch up between each other. So I paid for some year, you know, I had more withheld from me, and that was your taxes you will meet the difference, or if that's just what do we owe the IRS now with what we've done. Usually it's the latter, but my sense is if that's the case then you know, you know, I would try to get out of paying quarterly estimate tax payments. So if my, I've been married for 30 years so if my wife was working and independently she does some parts and crafts, and if she made money, so let's just say she makes money. Then she'd say I've quarterly estimated taxes to pay I'd say hey, I'm just going to go to payroll and ask them to increase withholding on my salary. That way, you don't have to do anything because it's all one bucket. What the IRS cares is that you paid in so much, they don't care who pays it, and they don't care necessarily which which of the two just pay it in, and we're good enough. If you two want to work that out between you fine but I just care that enough money came across so you can always shift the back and forth saying. Okay, great thanks and does the information discussed today apply a postdocs how much of it does. And actually broadly defined tax payer is everybody. And you're a postdoc you're either one, you're either an NRA, or you're going to be an RA or US citizen, either way, you're subject to this, these tax rules. And if someone received a moving stipend in mid July. They will have to pay tax on this by September 15. Yes. Well, first, it is taxable to concepts here, because there's no exception for moving so you got stipend, and you paid and you used it to pay to move to get yourself here. You could have done a lot of things with that that's what you chose to spend on it doesn't matter still taxable income. Now, whether you have to pay tax on it or not because it comes into your taxable situation. It really comes down to what your tax situation looks like. But if you, if that's all you've got as far as money, and that's what you earn, then, you know, bottom line is when you add up your annual amount do you think it'll be 1000 or more if it's more than 1000. Yeah, you may have to do a quarterly estimate of tax payment to both the Fed and the state, depending upon what the amount of money. You should think about it. Let's put it that way. It's considered down to your individual tax situation. Everybody has something different right so they're like, I thought it'd be taxable. It's taxable. Whether you have to pay taxes not comes down to your tax situation. So, some people may have worked before that, before they moved at a company that was withholding in fact it was over withholding on their income. They were going to get back a huge refund, then whatever tax you pay on the moving expense is basically going to be offset by that amount that they over with help so you can see how that works. So, that's a scenario. Okay, thanks Ed and someone expects to get a child credit for having a dependent when they file in April 15. How would this impact the quarterly taxes, would they pay quarterly and then possibly get a refund when they file in April. Well, that's one way to do it you can overpay. You can also when you go back to that slide on how to compute your taxes, you do it annually, and you bring in the child care credit. And that helps reduce the tax so now you know how much you have, how much you have which has been reduced by the credit to pay throughout the year. That's all. But, and you can always work at Sam will you pay more in the quarters knowing you're going to get a huge amount back next April. So people do that again in taxification because it's your money, you're getting back no reason to get overly excited but it is, that's one way to do it. We, my wife and I we tend to withhold, because we always get a nice bill at the end and it always comes in handy. So, and I'm, and I'm both accountants, and you'd think we'd be much more savvy about our money but not a lot of money. But the idea is, we prefer that that's that's we look for, you know, a more word about making sure we enjoy our lives than, than making sure I do everything right by financially for my tax plan. So, this idea. Okay, thank you. And so when you say your tax situation. No one made income from a job, but worked in Florida, and only received this moving stipend from Michigan, and it would be less than $1,000, which means they don't need to file quarterly, correct. So that was, now you're getting into a lot of good stuff so you worked at a company in Florida because you got fed and state taxes and then in addition to your taxes they gave you $1,000, which they probably didn't withhold on. From a fed perspective, you got to figure out how much they withheld, and whether that $1,000, it has taxes, but it may be covered, because whatever taxes you have they over withheld on the general wages, which they may have done, you'd have to know you did the W for that talked about how much withholding they should have you meaning the employee or this individual from a state perspective, the question is does $1,000 fall into Florida, or does it fall into Michigan. And for that you'd have to read the instructions on Michigan because a lot of times states say if you move from you don't get to count it but if you move to you do. So Michigan's thinking they're going to get that $1,000. Florida doesn't have regimes so they're not going to give you any help, because there's not going to be any instructions or any rules because they don't have a reason for. But there is a question and I like to take the argument that that $1,000 was not meant to be spent in Michigan it was spent every state getting to Michigan. So I'd like to think it's not all taxable and I would I would look into that but that's just me. Okay, well, I'm checking time. So we've got three minutes. So, if I can, I think I made my point I just want to finish with this last slide. These are the publications, somewhat helpful, but again written biased by the IRS for the IRS. That said they are very helpful for this ripple effect pulling up a lot of concepts that we talked about and getting to understand them and feel better about them. And I do know a lot of positions the IRS takes can be challenged and you're free to do that. So, if you do, you want to make sure you document it and you want to keep your, your receipts or whatever the situation is. So you can defend it. The problem is when you're audited you're not audited within three months or four months of filing the return, you'll be audited about two years afterwards. Typically, you may not even be at the University of Michigan you may not even be in Michigan anymore. But keep in mind that, and what happened and many times you've moved multiple places since then, and many times you've moved, and you didn't bring that box that box you kept with all the receipts, or your, I think that way I think, I don't think digitally but even digitally, you delete your file, whatever happens, you want to make sure that you are always thinking about taxes each year, and that you tie it together for previous years as well, at least until the audit period passes. I have two more questions. Is there any place on campus that can help students fill out their tax forms for their stipends? They have a VITA program, a volunteer taxes program, a bunch of accountants and tax preparers get together and offer this service pretty much in the month of March and the first two weeks of April. Other than that, there's the International Center we talked about, which is extremely helpful for non-resonance, I mean, extremely helpful. But I think that's about it. Okay, thanks. And was the stipend that folks receive from the university considered to be eligible for an IRA, specifically a Roth IRA? Yeah, that's a great question. So IRAs, they come in individual retirement accounts, and that's like any kind of the KIO or any other kind of arrangement you want to come up with, that's always based on earned income. This wouldn't be earned income, so it wouldn't qualify. And you'll know it's earned income because you're paying FICA or self-employment tax on it. So, again, you're paying 15.3% additional tax or at least half of that with FICA. So it's not always a benefit. Okay, thank you, Ed. Thank you very much. Thanks, folks, and have a good day. Thank you everyone for attending. We will have the slides available for those. Ed. Sure. I've already sent off the slides to Paul. And I think he hasn't copied. So I think what I just showed you here, I think you've got a copy of. We will make sure that the slides are available to you in the coming days. And thank you for attending and thank you for your questions and for participating. And we hope you have a great day.