Task Force on Taxation

Overall Description of Policy and Problem:

MIT's Policy

The 'reasonable compensation for RAs and TAs' (link to MIT's official policy letter) is a policy that MIT has adopted in response to the 1998 Tax Reform Act passed by Congress that makes salary paid to TAs and RAs taxable. Because tuition subsidies for RAs are not subject to tax, the law asks for 'good faith allocation' of funds to prevent a disproportionate subsidy of tuition over stipend that would reduce a students tax liability for work performed. MIT's policy is to always pay RAs and TA with a 63.5 / 36.5 percent stipend / tuition ratio. This policy has helped MIT avoid expensive fines that could be levied if the IRS found MIT in violation of the tax code during yearly audits.

Student Impact

For students who are funded solely by university RA and TAships, the 'Reasonable Compensation' policy has no ill effect. For students who rely on RA or TA funds to supplement a tuition shortfall from an external fellowship (e.g NSF, NRSA, et al), this policy requires that a student receive an inflated stipend from which they must pay tuition back to the university. This inflated stipend level can affect a student's tax liability and eligibility for certain programs. Currently the university compensates students with excess stipend payment to cover 15% federal and 5.3% MA taxes. However, the university currently has no policy to compensate students with families who, as a result of the inflated salary, become ineligible for benefits from the Earned Income Tax Credit and government-subsidized programs such as: WIC (Women, Infants, and Children), MassHealth, Fuel Assistance, Transitional Assistance (Food Stamps), and others. The yearly fiscal impact of the policy on a student may be several thousands of dollars depending on family size, income, health etc.

Advocacy by the GSC

Because there is currently no administrative policy to address this problem, the HCA is working to assist students in dealing with these issues with 4 specific goals in mind:

  1. Publish information for students with families about the "reasonable compensation" policy and its effects
  2. Document the breadth of the problem and the financial impact on individual students for the fiscal year.
  3. Work with the institution to provide verification of "take home" stipend levels to help students meet eligibility requirements of various programs.
  4. Obtain discretionary funds from the administration to compensate affected students.

If you are currently affected by this policy please contact the HCA Task Force on Taxation (). We are currently working with the new Dean of Graduate Students, Steven Lerman, to address these issues. We may be able to assist you in negotiating eligibility and in recovering funds in the case of financial loss. The following links provide additional information about specific programs and taxation policies where a student's eligibility might be compromised.

Earned Income Credit:

Information about how this credit is calculated is available online: IRS publication 596 and summarized in the Wikipedia entry 'Earned Income credit' . Students who take home less than $36,348 a year in earned income after paying back tuition to MIT would lose money because of the current "Reasonable Compensation" policy. To determine the total loss, use the tables in either of the aforementioned documents to determine the eligible tax credit before and after subtracting the stipend money that you pay back in tuition. In some cases this may be as much as 20% of the money that you are required to pay back. Please send the information to the HCA Task Force on Taxation () and we will work with you to recover these funds.

Low Income Home Energy Assistance Program (LIHEAP):

http://www.mass.gov/dhcd/components/cs/1PrgApps/LIHEAP/default.HTM

This program assists low-income families with paying expensive heating bills in the winter. It is administered on a local level. In some areas they have accommodated students who explain MIT's accounting policy and show proof of required tuition payments. If your local program requires verification from the university, contact the HCA Task Force on Taxation ) and we will assist in obtaining official documentation from MIT explaining the policy and confirming a students 'take home' income.

MassHealth

http://www.mass.gov/masshealth/

For some students MassHealth is a free alternative to MIT's extended insurance plan for spouses and children. Eligibility is income dependent, and for some students MIT's "Reasonable Compensation" accounting policy may bump them over the eligibility requirement. If this is the case, contact the HCA Task Force on Taxation () for assistance in obtaining documents from the administration that can verify "take-home" income. If students are unable to recover eligibility through this avenue, we will assist you in petitioning the administration for to recover money spent on health care through MIT's extended insurance plan for spouses and children that would have otherwise been free.

WIC (Women, Infants, and Children)

http://www.fns.usda.gov/wic/

WIC is an excellent resource for low-income families that are expecting or with young children. This government service provides a monthly allowance of certain foods (milk, cheese, juice, etc.) for mothers and children. WIC strictly adheres to gross income as reflected by current pay stubs when determining eligibility, so students with an inflated salary from MIT's "Reasonable Compensation" policy will lose benefits. Contact the HCA Task Force on Taxation () if you have lost WIC benefits due to this accounting policy. We will assist in recovering money to compensate for this loss.

Massachusetts Department of Transitional Assistance (DTA - Food Stamps)

www.state.ma.us/dta

The DTA offers food assistance for low-income families with children. This government service provides a monthly allowance for groceries. The DTA strictly adheres to gross income as reflected by current pay stubs, so students with an inflated salary from MIT's "Reasonable Compensation" policy will lose eligibility for those benefits. Contact the HCA Task Force on Taxation () if you have lost the benefits due to this accounting policy. We will assist in recovering money to compensate your family for this loss.

To get involved, or to find out more information, please email .