Compensation/Salaries/Wages
Compensation represents amounts paid for services rendered. This includes payments received in exchange for performing services as teaching assistants and research assistants at MIT. These payments are processed through VPF HR/Payroll.
Service income, classified as employee
- The IRS taxes compensation at marginal graduated rates. This means that income earned over certain thresholds is taxed at progressively higher rates.
- Income taxes usually amount to about 14 percent of total income but may be as high as 30 percent.
Royalty/Prize/Award
Royalty: A royalty payment is a payment for the right to use some form of intangible property (e.g. copyright, patent).
Prizes and awards are amounts paid in recognition of an outstanding achievement or winnings in a competition, raffle, or other contest. When paying a prize or award, it is generally for a past performance. However, if the amount is intended for use in future research or study, the payment may be more properly categorized as a scholarship or fellowship.
- Exceptions – Tangible personal property given to employee for length of service or safety. See the restrictions at https://www.irs.gov/pub/irs-pdf/p5137.pdf.
- Cash or gift cards are always taxable.
A 30 percent withholding tax rate applies in the absence of claimed tax treaty benefits.
The content in this website is provided for informational purposes only. MIT does not offer legal, accounting, or tax advice and services. This information should not be used as a substitute for consultation with a professional accounting, tax, or legal advisor. MIT recommends that students consult a tax advisor for individual tax advice.