Taxes and Science Don't Mix
    By Michael White | April 14th 2008 12:47 AM | 4 comments | Print | E-mail | Track Comments
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    There is no better way to fall into an IRS black hole than to try to become a scientist. I'm a postdoctoral fellow - which means that I have my PhD, but no permanent job; I'm spending a few years doing research in a lab run by a more senior scientist. This is a typical part of the career path for most people in the natural sciences who want to direct their own labs at a research university or with a company. While a postdoc position offers valuable training, its also an excuse for institutions to get work from trained scientists without paying them very much. After getting your PhD (generally 9+ years of training, if you count college), you can land a postdoc position with the lucrative starting salary of $36,996, which really, really makes you feel like that PhD was worthwhile! But besides the salary, you get screwed by the IRS because according to the IRS: 1. You're not an employee - not of the university you're at, nor of the government organization funding your research and salary. Thus you technically have no employer-sponsored health insurance; all of your health insurance premiums are taxable income. 2. You're not self-employed either, by the standards of the IRS - which also makes you lose out on certain tax benefits. 3. You don't actually "earn" any income - by the standards of the IRS, what you are paid is a iving stipend, not wages paid for a service - so in my case, with 3 kids, I get screwed on certain child tax benefits - such as the ability to deduct any daycare expenses. 4. You are not a student - postdocs already have all the degrees they want; they're generally not looking for more. But not being a student also screws you in some instances with the IRS. In the US, we're supposedly worried about the fact that we're not training enough scientists to fill our society's future needs, but unless you really, really like science, there is absolutely no incentive to choose it as a career. So how do we get college kids to sign up? Easy: don't tell your freshman biology students that after 4 years of college they'll need another 5-6 years of grad school, and 3-4 more years as a postdoc before they land their first permanent job and get to do the things their friends in other professions are already doing, like saving for a house, retirement, kids' college, not to mention vacations. Oh, and we also shouldn't mention that because of flat NIH budgets for the last few years, its harder than ever to get money to do your research.


    I am still curious how the school can get away with that non-employee stuff. In software, and lots of other businesses, we have independent contractors but ...

    ... they can work for other people.
    ... they are paid by the job.
    ... they hire and pay their own assistants.
    ... they set their own working hours.

    I am surprised the IRS has not come after them. It can't be that this huge grey area has escaped the notice of the government, since there are a lot of post-docs out there.

    This article from a 2002 issue if Science (subscription required) lists many of the key court decisions involving the IRS and fellowships, including decisions concluding that postdocs are not self-employed and fellowships funds are not 'earned income.'


    I should clarify, because I think the government shares the blame:

    Postdocs who do not have their own independent fellowship funding, that is, people who are paid off of some grant that their lab director secured, are usually considered university employees - they are in essence hired to do the work proposed in the grant. I was an employee for the first 6 months of my job.

    But then I obtained an NIH Postdoctoral NRSA fellowship - money awarded to me, as opposed to my lab director, (getting something like this is a critical career step - so a good thing in every sense except a tax one!). This suddenly makes me an independently supported researcher who happens to be working at the university, no longer an employee.

    As far as I can tell, the universities and the NIH (and all the other funding agencies that provide similar fellowships) are acting in accordance with tax law as interpreted by the IRS - it hasn't escaped the notice of the IRS, it is the IRS that has interpreted the law this way (and I don't think the IRS is unreasonable in their interpretation of the law - the law needs to be fixed).

    It would be an easy fix, but I doubt Congress considers it a high priority.

    This page has a lot of links to information on the issue.


    Oh, and did I mention that postdocs with fellowships like mine can't quit without repaying all the salary they received while on the fellowship?

    We sign a payback agreement, which says we're not getting paid for our current work, we're getting 'supported' in return for a commitment to spend a certain number of years doing research.