A scholarship is an amount paid for the benefit of a student (usually an undergraduate) at an educational institution to aid in the pursuit of studies.
Recipients must not be required to perform past, present or future services for the grantor or the USF department in charge of administering the award. If services are required, the payment is compensation for services performed that is subject to federal income tax withholding and also Social Security and Medicare (FICA) tax withholding.
The payment may be considered compensation for services if:
- the payment is made in consideration for past, present and future services
- the payment represents payment for services that are subject to the direction or supervision of the University
Such individuals may be considered an employee of the university or an Independent Contractor.
Scholarship payments made to U.S. citizens are not subject to Social Security or Medicare tax (FICA). Scholarship payments in excess of required tuition, fees and books are fully taxable for income tax purposes; however, they are not subject to income tax withholding.
Individuals receiving scholarship payments in excess of tuition, fees, books, supplies and other equipment required for courses are responsible for making quarterly estimated federal and state income tax payment, if needed.
Scholarship payment made to non-resident aliens in excess of required tuition, fees and books are subject to special tax provisions and withholding Financial Aid in order to ensure proper withholding for non-resident aliens.
All scholarship payments should be processed via Financial Aid.