Congratulations on your research funding! Please be mindful of the tax implications.

Your grant funding is much less than the negotiated salary as a clinical trainee at Michigan Medicine. Under the HOA Agreement Michigan Medicine must make up the difference. Michigan Medicine only withholds income taxes on the portion that they pay, however the entire grant amount is also taxable.

Estimated Tax Payment

You are responsible for paying the income tax on the grant portion of your paycheck. The IRS and state of Michigan expect to receive their share of the money through out the year, not just when you file your taxes in April. You must make quarterly estimated tax payments.

You can use the current year estimated worksheet for both the IRS and State of Michigan online.

Quarterly estimated taxes are due on April 15, June 15, September 15, and January 15.

Keep in mind: You may only be on the T-32 gray for half of the calendar year. For example if this is your first year with a grant, you were fully paid by UM and they withheld all income taxes according to how you filled out your W4 from Jan-Jun of this calendar year. The academic year started in July and your grant took effect on July 1. Consider what UM already withheld for the first half of the calendar year and the small amount that will be withheld by the UM for the remainder of the year. Compare that to what you expect to owe and split the remainder into the September and January estimated tax deadlines.

Keep records: Always keep records of the confirmation pages for every transaction you make and follow up that they are deducted from your bank account as there have been times a transaction may not have processed due to some error and then you are left to blame for a missed payment.

Filing your Taxes

Michigan Medicine is not required to report the fellowship income in any way to the IRS. Likewise the NIH will not send any official tax form. When it comes time to file your taxes, the fellowship income will not appear on your W2. However you still need to report it as income on your taxes. You can find the amount to use on your December paystub under "Fellowship." If you require documentation, you can request a letter from the Payroll department that lists the grant amount.