Note: This is a printed version of https://isc.uw.edu/your-pay-taxes/stipend-payments-explanation. Please visit this page on the ISC website to ensure you're referencing the most current information.
Stipend Payments Explanation
Understanding what is considered a stipend can be confusing. The information below is from the U.S. Department of Labor’s (DOL) guidelines for a Trainee/Learner. These guidelines state that if an internship/stipend meets the six criteria listed below, the position can be categorized as a Trainee/Learner position and does not need to follow minimum wage regulations. If your internship/stipend does not meet these criteria, an employment relationship exists and you must hire that person as an employee.
The decision to pay a stipend is dependent upon the funding source, an individual’s relationship with the University and the activities performed. The ISC is unable to advise departments on whether or not a stipend payment is appropriate and the decision must be made at the department level.
- The training, even though it includes actual operation of the employer’s facilities, is similar to training that would be given in a vocational school.
- The training is for the benefit of the student.
- The student does not displace regular employees, but works under the close observation of a regular employee.
- The employer provides the training and derives no immediate advantage from the activities of the student.* Occasionally, the operations may actually be impeded by the training.
- The student is not necessarily entitled to a job at the conclusion of the training period.
- The employer and the student understand that the student is not entitled to wages for the time spent training.
* If the internship is more of a training/learning experience, as opposed to a job, it is typically acceptable if the employer derives some advantage from the student’s service. The internship must be predominantly for the benefit of the student and not the employer.
Stipend Payments are not considered wages and have no Federal Witholding Tax deducted from them (the only exception is for some Foreign Nationals).
Stipend Payments are distributed with payroll wages, but are not reported as wages on a Form W-2.
UW Student stipend payment information will be reported at year end on a 1098-T; review the Year End Tax Resources page for more details.
Non-UW Student Trainee/Learner stipend recipients will receive a Stipend Letter at the end of the year.