POLICY ON PAYMENTS TO STUDENTS

The purpose of the Policy on Payments to Students is to explain how to categorize payments, made to students in support of their education-related activities, for scholarships, fellowships, stipends, internships, compensation for services, and prizes and awards. The policy addresses payments made to Wesleyan undergraduate and graduate students.  Each payment is categorized by the substance of the payment. 

Use Wesleyan's Payments to Students Flowchart to categorize a payment.  Additionally, a Student Payment Voucher Attachment, and additional detail as noted, MUST accompany a WFS voucher. 

Reporting and taxation of student payments are governed by the Internal Revenue Code (the "Code") and Treasury Regulations are enforced by the IRS.  Section 117 of the Code provides rules for determining whether a stipend amount is a compensatory or non-compensatory grant.  Section 74 of the Code provides rules for determining whether a stipend amound is a prize or award.  IRS Publication 970, Tax Benefits for Education, explains the tax rules for determining 1) when a payment is a scholarship or fellowship payment, 2) the various types of payments typically treated as non-compensatory grants, and 3) when a non-compensatory grant can be excluded from income.

Students can learn more about the general treatment of educational payments for tax purposes here.