Outstanding UW students are frequently rewarded with cash or other benefits as awards or prizes for exemplary academic performance. Payments are made through different UW administrative offices. Complex federal tax laws complicate the amount, tax withholding and tax reporting of these payments. For guidance regarding the new Washington legislation that affects employee award plans please consult with your HR department.
There are generally two types of prizes or awards paid by the University to a student.
1) Prizes that are considered a scholarship or fellowship - this type of prize is an amount paid to aid an individual in paying for his study, training, or research. This payment should not represent payment for services.
2) Prizes that are not considered a scholarship or fellowship - this type of prize would involve a payment as an award or recognition for a special achievement such as winning a judged competition. The recipient of this type of prize can use the money for any purpose.
Category 1 Prizes
These types of prizes are not taxable to the extent they are used to pay for tuition and required fees, books and equipment. Any amount in excess of these requirements is taxable to the student. If award proceeds are not restricted as described above, please contact the UW Tax Office at firstname.lastname@example.org, or 206-685-0571 for further clarification.
Prizes that are considered scholarships or fellowships to students who are US citizens or resident aliens do not require tax withholding or reporting. All prizes of this nature paid to non-resident alien students must be reported on a Form 1042-S by the University of Washington; amounts not used for tuition, books and fees must be withheld at 14%.
Category 2 Prizes
These types of prizes are given without stipulation as to how it must be used. It is often given when an individual wins a competition. Prizes of this nature may be taxable to the individual but are not considered wages even if the student is employed by the University. For US citizens and resident alien students, these payments are reported by the UW at year end on a Form 1099-MISC if they exceed $600. For non-resident alien students, 30% is withheld, and payments are reported by the UW on Form 1042-S for all payments. The country of permanent residence must be on the Check Request form.
Paying a Student Prize or Award
For Awards or Prizes to Non-UW students or for Category 2 (non-scholarship) prizes to UW students
Make requests for payment of awards or prizes to non-UW students or payment of Category 2 prizes to UW Students by completing a Payments to Individuals form in Ariba. For more information, see: http://finance.uw.edu/ps/how-to-pay/payments-to-individuals#Awards/Prizes
For further information or questions, contact:
- For questions about 1099MISC tax reporting for US citizens and resident aliens, email email@example.com
- For questions about tax withholding and reporting for non-resident aliens, email firstname.lastname@example.org
- For questions about prize payments to Non-UW students or for Category 2 prizes to UW students, email email@example.com
- For questions about payment of Category 1 prizes to UW Students, email firstname.lastname@example.org