This policy was created to explain the method of authorizing payment of a prize or award and establishing a sponsored project in the accounting records of the Georgia Institute of Technology to charge expenditures related to prizes or awards.
The Office of Grants and Contracts and/or the Controller’s Office are charged with the establishment of sponsored projects in the Chart of Accounts and the accounting records of the Georgia Institute of Technology upon receipt of properly authorized/approved budgetary and invoicing documentation for prizes and awards. The Office of Scholarships and Financial Aid and the Bursar’s Office are charged with the review and approval of prize and award payments issued by the Georgia Institute of Technology. Requests for payment should include a valid Institute project number from which the payment should be made and must include adequate documentation describing the purpose of the payment (e.g. annual staff award, prize for participation in special program, etc.). Funding should come from sources that permit the prize and award payments, such as Georgia Tech Foundation and Georgia Tech Research Corporation, etc. State funds cannot be used to pay prizes and awards.
This policy applies to all colleges, schools, departments, and units of the Institute.
Prize and award recipients who have been employed in the current calendar year should be submitted on the prize and award form that can be obtained from the payroll department. Payroll Prize forms should be forwarded to Accounting Services for approval. The following steps will be taken upon receipt of a request for issuance of an award or prize:
- The Bursar’s Office will initially verify the purpose of the prize or award. The requesting department must include a description of the reasoning/rationale for the prize on the request form and attach any/all supporting documentation (e.g. attach a notice of annual competition.)
- The Bursar’s Office will review the request for an authorized sponsored project number to be charged for the prize and award. If this information is not clearly identified on the request, the initiating unit will be contacted in order to determine the project number. If no funding source can be identified, the request will be returned to the initiating department. If a project does not already exist in the accounting records of the Institute, the initiating department must request to establish a new sponsored project. If funding is from either the Georgia Tech Foundation or the Georgia Tech Research Corporation, instructions for establishing projects should be followed as described in the Policy and Procedure Manual. If funding is from external sources, a sponsored project should be initiated and requested through the Office of Sponsored Programs.
- The Bursar’s Office will verify budget availability prior to the approval of prize and award payments. The initiating department is responsible for all costs incurred if payments are not reimbursed from the designated sponsor. The departments should read the instructions carefully on the award and prize forms when calculating the award amount and estimated total department's expenditures. For more information regarding tax withholdings, refer to Payroll procedure “10.12 Employee Awards and Prizes”.
- Upon completion of the review of the prize or award request, the approved form will be forwarded to the appropriate office for payment.
- Forms for awards and prizes to recipients who have been employed in the current calendar year will be forwarded to the Payroll Department for payment. The Payroll Department will first verify GIT employment for the recipient. Payments will be posted to the accounting records as extra compensation -- account code 511910. The Employer portion of FICA at 7.65% should be included in the budgeted amount for payments to these recipients. Refer to Payroll procedure 10.12 regarding the gross up amount of award if the department is willing to absorb expenses for the employee's income taxes and FICA withholdings. Payment can either be added to the employee's next scheduled payroll or checks will be distributed to initiating departments.
- Payments made to prize and award recipients who have not been employed in the current calendar year will be processed through the Accounts Payable Department. A check in the award amount will be issued to the recipient using the account code 751120 for such payments. No tax will be withheld, but the recipient may receive a 1099 form if annual payments meet/exceed certain levels established by IRS guidelines. Recipients that have been classified as “non-resident aliens” may be taxed unless a current tax treaty exists between his/her home country and the United States. The department is required to provide the recipient's GTID on the prize form.
Student Award – No Services Required
A student (US Citizen or Resident Alien) who receives a scholarship, fellowship or traineeship award for which he/she is not required to perform services (past, present, or future) may exempt the portion of the award that is used for qualified tuition and related expenses (tuition, fees, books, supplies, and other equipment required for courses). Any portion of the award used for other expenses, such as room and board or travel, is considered part of the student's gross income and must be reported on his/her individual tax return. Because the student has no employment relationship with the Georgia Institute of Technology (the Institute), the Institute is not required to withhold taxes on the taxable portion of the award and has no tax reporting obligation to the Internal Revenue Service (IRS) or the student.
Student Award – Stipulations on Expenses
A student who receives a scholarship, fellowship or traineeship award in which the terms of the award state that a certain amount cannot be used for tuition, fees, books, supplies or required equipment for his/her courses (i.e. a certain amount must be used for room, board or anything other than tuition, books supplies or equipment) is responsible for reporting that amount as gross income on his/her individual tax return. Again, because the student has no employment relationship with the Institute, the Institute is not required to withhold taxes on the taxable portion of the award and has no tax reporting obligation to the IRS or the student.
The tax rules applicable to scholarship, fellowship and traineeship awards made to nonresident alien students differ from those applicable to students who are US citizens or resident aliens. The total amount of a scholarship/fellowship/traineeship award made to a nonresident alien student that does not represent compensation for services is reportable by the Institute to both the IRS and the student on IRS Form 1042S. The portion of the award that is used for qualified tuition and related expenses are exempt from US tax. The remaining portion of the award is subject to tax and is considered part of the student's gross income and must be reported on his/her individual tax return. The Institute will withhold tax at the rate of 14% on this taxable portion unless the award is exempt under a tax treaty between the US and the student's home country. The student must supply the Institute with IRS Form 8233 in order to claim the benefit of a tax treaty.
The Institute is responsible for withholding payroll taxes on the portion of a scholarship/fellowship/traineeship award made to a student (U. S. Citizen, Resident Alien, or Nonresident Alien who is not claiming an exemption under the provisions of a tax treaty) which represents payment for services required to be performed in order to receive the award. The Institute will provide the student with a Form W-2 at year end which will report to him/her income earned and taxes withheld. The student is responsible for determining his/her tax liability and filing his/her individual income tax return with the IRS.
The portion of a scholarship/fellowship/traineeship award that constitutes qualified tuition and related expenses is not subject to tax. Ultimately, it is the student's responsibility to determine his/her tax liability and file a tax return with the Internal Revenue Service each year.
- The student is ultimately responsible for determining his/her tax liability and filing a tax return with the Internal Revenue Service each year.
- The Institute is responsible for withholding payroll taxes on the portion of a scholarship/fellowship/traineeship award made to a student as needed.
To report suspected instances of noncompliance with this policy, please visit Georgia Tech’s EthicsPoint, a secure and confidential reporting system, at: https://secure.ethicspoint.com/domain/en/report_custom.asp?clientid=7508