IRS Subpeonas Student RecordsBy Vipul Bhushan
The Internal Revenue Service is expected to serve a subpoena to MIT today for financial records about students who received taxable fellowship income in calendar year 1990, according to a letter being sent to affected former and current students.
About 1,500 people are covered by the subpoena, which requires the name, social security number, amount of tuition paid, and award amount of every student who received fellowship support which exceeded tuition by at least $2,000.
Pursuant to the Tax Reform Act of 1986, any portion of fellowship support awarded after Aug. 17, 1986 in excess of the cost of tuition, books, and other supplies is federally taxable in the same manner as earned income. However, withholding is not required on such income, except for non-resident aliens, who are subject to a withholding rate of 14 percent. MIT is not required to inform the government of such income.
Fellowships were exempt from federal income taxation prior to August 1986.
According to the letter, written by Frank E. Perkins '55, dean of the graduate school, and Frederick I. Crowley, assistant to the comptroller, the information will be released to the IRS on March 22. Those receiving the letter have until that date to contest the disclosure of their records.
Perkins predicted that some students receiving the letter will be audited by the IRS. He said he "hopes few students find themselves in an unpleasant situation with the IRS," adding that students "should make sure [they] understand what [their] obligations are."
Crowley, who has been the liaison between MIT and the IRS, said the Institute is going to "great lengths" to contact all those whose records are being subpoenaed, as required by federal law. He said that 80 percent of those affected were graduate students and 20 percent were undergraduates. Mailing addresses were obtained from the Office of the Registrar and the Alumni Association, according to Perkins.
The IRS has refused to provide a reason for the summons, said Crowley, and Maritza Melecio of the IRS's Boston office, which is handling the summons, refused any comment yesterday.
Harvard University and Tufts University were also required to provide student fellowship information to the IRS within the past year, Crowley said. Several students were subsequently contacted by the IRS. He assumes MIT students would face an audit should the IRS discover any irregularities.
MIT is simply a third party record keeper in this matter, said Crowley, and is not under any legal investigation. MIT's principle law firm, Palmer and Dodge, had confirmed that there were no legal implications for MIT, Perkins said.
Caryl B. Brown G, a Graduate Student Council representative, said he doesn't "think there's a change in rules, just a heightened degree of enforcement." The GSC's primary goal, he said, is to "get the word out that the IRS is improving its collection efforts," and to "make sure students are not hung out to dry."
GSC President Anand Mehta G agreed, adding that the GSC is not, for the moment, playing an active role in this issue. However, this matter will be discussed at the next GSC meeting on March 18, he said.
Brown, who is also a member of the Committee on Graduate School Policy, where the matter has been raised, said the recent IRS examination of Harvard had revealed enough students who had not reported fellowship income to make an MIT audit worthwhile. The excess tolerated in the Harvard case was $9,000, instead of the $2,000 threshold in today's summons, Brown added.
Perkins speculated that the reason for the discrepancy was that Harvard's case was "early in the game," and that the IRS is now fine-tuning its efforts.
Perkins and Crowley said MIT makes a strong effort to educate students about the tax laws, and writes tax guides for students, offers annual tax workshops, and provides information in the Graduate School Manual.
Perkins said he hopes this summons of student financial records "is a one shot deal." He said he would "prefer a clear-cut mechanism for withholding" to make it easier for students to meet their tax obligations. Perkins finds the "taxing of graduate students hard to understand," but said the graduate school would be "more aggressive in absolutely ensuring that students are aware of the various tax implications" in the future.