Lake Tahoe and the evil 1098-T

Today I’ve been thinking quite a bit about Lake Tahoe. Why? Well, because I did my taxes. Let me explain. This post will begin largely as a rant about 1098-T forms, and the absurdity they represent. 1098-T forms are what you get when an educational institution gives you fellowship or scholarship money. For most of my graduate career, somewhere around half of the money I made came in the form of one of these things. In the last few years, it was almost all of the cashola. Because the money was given in order to facilitate research, it was untaxable. Money I made as an hourly employee TA-ing, or RA-ing, or whatever-ing, was taxed, BWRU paid payroll taxes on that salary, taxes were deducted from my paycheck, and I’d receive a W-2 at the end of the year. Easy. It was even decided in a few tax court cases that if you were a student pursuing a degree, then money given in the form of fellowships and scholarships was intended to further your education, and therefore not taxable income. This all changed a few years ago (from what I can gather, although the exact timing is difficult for my non-accountant brain to figure out, perhaps if the DZA is reading he can contribute his mad skillz). Now it doesn’t matter at all what the money was given for, it all depends now on how it is spent, and the list of what is a “qualified education expense”, and therefore non-taxable, is exceedingly short. All of the money you are given, except that spent on tuition and items required for attendance counts as taxable income. Items required for attendance includes things like books required for a class and certain fees, but absolutely nothing else. If you use your fellowship to buy a laptop, or do field research, or attend a meeting, maybe buy lab supplies, thesis paper, safety glasses, sample bags, field books, a hand lens and brunton compass… none of that counts as “qualified educational expenses.” Room and board? no way. So, if you received 27,000 in fellowship money, and out of that was paid 9,000 in tuition and you bought no required textbooks, you must, at the end of the year, pay taxes on the remaining 18,000. That’s right, you owe something over a grand. I’ll pause here if you need to change your newly soiled pants.

I am no anarchist, and truth is I have no problem paying taxes, but the logic of this defies me. The university pays me in a way that they do not have to pay payroll taxes; no social security, no medicare, no disability, nothing. But then I have to act like an employee and pay taxes on the money, even though I get none of the benefits of being an employee (my social security pay-ins, for example, stagnate when I am on fellowship). It also astounds me that if I use the money for research related expenses, I still have to pay taxes on it, because none of them count as “qualified tuition expenses.” Even though I was getting paid this way I was still officially a TA and/or RA, so how does BWRU get away with it? And how hard would it be for them to send a form letter to every student on fellowship telling them that they should pay estimated taxes or else expect to owe a few grand come April? Of course if I was loaded and owned a house then I could deduct the expenses as business related, but seriously, own a house? Pay mortgage? Qualify for a loan? What burns me up even more is that the focus of what is a qualified tuition expense really has nothing to do with the bulk of most graduate careers. Even in class-intense fields, you are usually done taking classes, at least for credit, by the third year. So, after that, during all of your research, you can deduct jack squat.

So this got me thinking about Lake Tahoe, South Lake Tahoe specifically, poor man’s Vegas, a place a geologist like me could make my fortune! But I hate Vegas, and casinos, so let me forget the ginormous check I have to write the government to help fund this, and focus on the nice part of Tahoe. The geology, the scenery, the skiing, the hiking, the fact that if I hid in the forest the IRS could never find me…

Lake Tahoe sits astride the California-Nevada border at the crest of the Sierra Nevada. It is a very large and deep lake (roughly 500m maximum depth, that’s the 12th deepest freshwater lake in the world), and is considered by many to be the westernmost basin and range graben. The lake is deep because there are active normal faults cutting through the middle and sides of the lake, separating the Carson Range to the east (Basin and Range) from the Sierra Nevada. These faults downdrop the block that makes up the bottom of the lake, thus creating an enormous bowl that holds water, and is therefore a lake.

figure from Garner et al (2000), GSA Bulletin v. 112, n. 5, p. 736-746

The following pictures are from the summer of 2005, and were taken at the southern end of the lake in Emerald Bay. If any of you are realizing for the first time that you somehow have to come up with a few grand because of how you were paid, well, at least these pictures are free. Actually, considering I am on the hook for about a month’s wages, if anyone wants to purchase the original photos for some absurd price….

This entry was posted in earth science, pictures, politics, Rants. Bookmark the permalink.

3 Responses to Lake Tahoe and the evil 1098-T

  1. Mark says:

    When I was in grad school (early ’80s), none of my research assistantship was taxed. A few years later the IRS decided it should have been, and so sent duns to every grad student I knew. Fortunately, the school backed us (it was not payment for services), and we got off. By that time, however, they had decided that assistantships were taxable. Maybe it was the same as you describe.I lived at Lake Tahoe in 1976-77. It was great. I doubt it would be the same today. Of course, neither am I.Excuse this if it’s a double comment. I seem to be having problems posting.

  2. You have to wonder how much they spent tracking you all down and how much they expected to end up making off of grad students. Seriously, even my largest debt to the IRS so far is what, a week’s worth of an IRS agent’s time, definitely not worth flying anyone around or paying for hotels…I have wished I could angle my life so I could live in Tahoe, even thought I think I’d feel guilty. It is an amazing place. Anyone in Tahoe want to hire a thermochronologist?

  3. Mark says:

    “You have to wonder how much they spent tracking you all down and how much they expected to end up making off of grad students.”Those were my thoughts exactly. I know of some former students, especially foreign students, who simply paid because they were afraid to fight the IRS. In my case, I asked for hearing with the IRS, but they delayed so long I had to file with the tax court to preserve my right to that action. I even enlisted the help of my congressional representative to try to get the IRS to respond to my request for an appeal.

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