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Should I be withholding taxes at "single" rate or "married" rate?

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  • Should I be withholding taxes at "single" rate or "married" rate?

    My wife and I are in a dual income household (me ~$71k as a fellow, her ~$41k working at a non-profit), no children or other dependents. For the next two years I'm doing research as part of my fellowship and receiving most of my income ($50k) through an NIH T32 grant, so I have to account for the taxes I'll owe on that money come tax day (it's considered misc income like lottery earnings, not wages). For the remaining $21k gross (and in general once I'm no longer funded by the T32 and getting all my salary through regular W-2 wages), would it be more advantageous to withhold at the single rate or married rate?

  • #2
    You're saying $50k on 1099 and $21k on W2? If so, I'd recommend both of you withholding at single. You probably should still do a projection to see where you'll stand.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3


      ($50k) through an NIH T32 grant
      Click to expand...


      I also wonder if that income to you is reported on a 1099...so is it the case that you actually receive both a W-2 and 1099 from the university?  Some people I know who received "partial grant support" of their salary still just get the same W-2 at the end of the year so I am curious how this works.  I sort of wonder if the university is still receiving your full salary from CMS as a Fellow, and also receiving salary support for you through the grant, and how do they handle the accounting of what is "earned income" and what isn't...?

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      • #4
        I receive a W-2 and just a letter from my hospital with the T32 amount paid over the past year, but it's not actually a 1099 form. My T32 money is not reported on the W-2.

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        • #5
          So.....does your W-2 show $71K or $21K?

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          • #6
            also be sure to pay estimated taxes on the t32 income.

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            • #7




              So…..does your W-2 show $71K or $21K?
              Click to expand...


              The W-2 shows just shows the $21k. I am including the T32 stipend as miscellaneous income not otherwise specified, kind of like lottery winnings as our HR department advised.

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              • #8







                So…..does your W-2 show $71K or $21K?
                Click to expand…


                The W-2 shows just shows the $21k. I am including the T32 stipend as miscellaneous income not otherwise specified, kind of like lottery winnings as our HR department advised.
                Click to expand...


                I realize this is not the point of your original post, but I think it's worth pointing out that your HR department is wrong about this advice. Line 21 is not the right place for your fellowship income.

                The IRS has very specific instructions on fellowship income not reported on a W-2. Per the 1040 instructions (top of page 22), line 7 should include "Scholarship and fellowship grants not reported on Form W-2. Also, enter “SCH” and the amount on the dotted line next to line 7"

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                • #9










                  So…..does your W-2 show $71K or $21K?
                  Click to expand…


                  The W-2 shows just shows the $21k. I am including the T32 stipend as miscellaneous income not otherwise specified, kind of like lottery winnings as our HR department advised.
                  Click to expand…


                  I realize this is not the point of your original post, but I think it’s worth pointing out that your HR department is wrong about this advice. Line 21 is not the right place for your fellowship income.

                  The IRS has very specific instructions on fellowship income not reported on a W-2. Per the 1040 instructions (top of page 22), line 7 should include “Scholarship and fellowship grants not reported on Form W-2. Also, enter “SCH” and the amount on the dotted line next to line 7
                  Click to expand...


                   

                  Thanks for catching that!

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