Some students unaware their scholarships can be taxed

By Taylor Riley

Accountants everywhere are in the midst of pulling out their hair during the 2012 tax season.

With tax forms due April 17, students may just be pulling out their hair alongside these financial advisers with the not-so-new news that their scholarships are being taxed.

“I don’t think it is fair to be taxed when some people need the scholarship money to live on,” said Katelyn York, a secondary English education student. “I don’t personally use my scholarship money for non-educational purposes, but someday I might, and having a place to live and eating is pretty important.”

The news may not be new, but many students do not know that their scholarships are being taxed by the IRS when they use the funds for anything other than tuition and some other school-related supplies.

For students who are confused, UK’s College of Law Volunteer Income Tax Assistance can help.

Student volunteers in this program can help prepare taxes for students who have income coming not only from scholarships but also from wages, interest, dividends, simple self-employment, unemployment insurance and other small miscellaneous items.

The university does not inform students that the recipients of the scholarships need to claim the funds on their tax returns, causing some dependent students to be in the dark.

“It is not the university’s responsibility,” Jennifer Bird-Pollan, a law professor, said. “Students should educate themselves.”

According to IRS.gov, if the payment of a scholarship is used for tuition, fees, books, supplies and “equipment” then it is considered tax free. Anything other than that, including room, board, travel and any other expense, would have to be claimed on a tax return.

“Taxes are relatively settled already,” Bird-Pollan said. “Students will have to track their spending themselves. It all hinges on having good records.”

Bird-Pollan suggested for students to bring every document they have from UK, employers and other wages, and VITA volunteers can see what is tax exempt.

For more information:

What: Volunteer Income Tax Assistance program

When: Monday through Friday from 3-6 p.m., Saturday from 12-5 p.m.

Where: College of Law Building room 47

What to bring:

– photo ID

– social security card

– all tax forms

– documentation of other income

– copy of last year’s return, if available