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I'm being offered a postdoc position at Penn State University.

The recent rise in salary sounds good (about 4000$/month), but I wonder taxes may be not included. Any help?

  • What field are you in? Will you be paid by a fellowship and if so, what is the funding agency? – cxrodgers Oct 24 '16 at 21:03
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    I'll bet Penn State will be happy to answer the questions you have. We here can only guess at the answers. – GEdgar Oct 24 '16 at 21:35
  • I sense that you are trying to figure out if, after taxes, the figure they are offering will still be attractive. My answer is probably. (Postdoc salaries are not huge, generally speaking. How health insurance premiums are handled is the big wild card here.) You can ask them approximately what that would be after taxes -- they should be able to give you a ballpark idea. – aparente001 Oct 25 '16 at 8:59
  • It depends on your country and your visa status. Check it on IRS website the related regulations – Greg Jun 15 '17 at 16:22
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You will be taxed like any other employee in the US, unless you are in the US temporarily and the US has alternative tax arrangements with your home country (see below). Salary is always reported in pre-tax terms. Your actual take-home pay will depend on deductions for things like healthcare, and the taxes in your state. At the new annual ~$47k level for postdocs, you can expect this to be in the vicinity of $2800-$3000/month, depending on your marital status, dependents, etc.

There are many online calculators for you to figure this out, for example HR Block or Intuit.

It's possible that if your home country has a particular tax treaty (link to IRS) with the United States your tax situation may be different. If this is the case, you may want to adjust your tax withholding accordingly, though you may also owe taxes to your home country. If you have taxes withheld that you do not actually need to pay, you can get them back when you file a tax return at the end of the year (typically in February-April), but you are essentially giving the US government an interest-free loan.

The institution you work for should have some resources and can help you with sorting out your tax situation. Local/state laws, countries of origin, your visa type, etc. can all influence your tax situation. The information I provide here is a guideline to know what your approximate income will be to help you make decisions about housing, etc before you start a position, but you should always study or get guidance on the particulars of your tax situation to avoid needing to correct things in the future.

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    Taxes will be automatically deducted from your paycheck each month [called "withholding"]. In theory, this deduction is calibrated so that no additional taxes are due on April 15, the date that your tax return for the previous year must be filed with the IRS. However, in practice often either you owe some additional tax, or that the IRS owes you a refund because you paid too much. For non-US citizens, whose tax situation may be more complicated, this may be more likely. (Note: US citizens can apply for an extension from April 15 to October 15, but I don't know if foreigners are eligible.) – Tom Church Oct 24 '16 at 18:56
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    @biotech Also, if you are a foreign national, check if the US has a tax treaty with your home country. In some cases, for some countries, taxes are not paid to the US for researchers at universities. Your home country may or may not still tax you on the income though. – tpg2114 Oct 24 '16 at 20:53
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    @Greg I added a link to a list of countries the US has some sort of tax treaty with that might impact post docs who are in the US on a temporary arrangement. – Bryan Krause Jun 15 '17 at 16:32
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    @BryanKrause I understand your point, but what I am saying is to not mislead people. I was a volunteer tax adviser, and met many who tried to go "just like any other employee" in US, filled out the wrong form, etc and it is pain in the but to correct sfter. – Greg Jun 15 '17 at 16:40
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    @BryanKrause I generally recommend university offices and their websites (eg payroll.utexas.edu/payroll-info/nonresident-taxes), but they give the same info. Also school districts/ states as their own taxes where treaties may or may not applied. – Greg Jun 15 '17 at 16:45
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I am a postdoc at a major research university in the US. Unfortunately, taxes can be quite complicated for postdocs. The answer is very different between fields (biomedical science, engineering, ..) and institutions. My experience is in biomedical science.

You definitely will owe taxes, and they will definitely be owed out of the amount they are quoting you ($4K/mo. or whatever).

You should call your employer and ask these questions:

  • Will my income be reported on a W-2 or a 1099-MISC form?
  • Will the cost of my health insurance be added to my income?
  • Will you withhold income from my paycheck for taxes?

Will my income be reported on a W-2 or a 1099-MISC form?

Most American employees receive a W-2. Many postdocs receive a 1099-MISC, especially (but not exclusively) those on individual fellowships.

If you receive a W-2, then the answer is very very simple (congrats!). You are receiving normal earned income and you can pay taxes just like any normal employee using the normal forms. Receiving a W-2 also entitles you to employee benefits (such as being allowed to have a retirement plan, commuting benefits, etc.).

However, receiving a 1099-MISC means that your income is not considered "earned income". You are considered more of a contractor (like a house painter) than an employee. Employers do this because they don't have to pay your Social Security or FICA tax, so it saves them money. Unfortunately, it is sort of a gray area whether the postdoc is supposed to pay these taxes either.

You have two options: Option 1: Declare yourself a "self-employed contractor". This means that you will pay a special self-employment tax to cover your Social Security tax. It also entitles you to deduct many living expenses as business expenses. This can save you money but will be a lot of paperwork.

Option 2: Pay your taxes as if the 1099-MISC income were normal income on a W-2. It's a bit of gray area because the income is simply marked as "other/miscellaneous" on the form, leaving it unclear as to whether the university considers you self-employed or not.

Probably one of these options is correct and the other is incorrect, but it is currently unclear to me which is which. Your institution may offer tax advice sessions to clarify this. My institution told me that they cannot tell me either way because they do not offer tax advice.

Source: http://evolvingpf.com/2012/03/earned-income/

Will the cost of my health insurance be added to my income?

It is not unusual for postdocs to owe taxes on the cost of your health insurance, even if your institution pays for this insurance. The cost of your health insurance would be added to your tax form. This is sometimes called "imputed income".

Source: http://www.columbia.edu/cu/vpaa/docs/postdoc_fellow_benefit_policy_memo_and_FAQs.pdf

This is a very unusual situation in non-academic industries so this can be a bit of a surprise for many people.

Will you withhold income from my paycheck for taxes?

If the answer is yes, then your life is a bit easier, because the institution will guess at how much taxes you will owe and pay about this much to the government out of every paycheck. Then at the end of the year, you file a return to correct for any over- or under-payment.

If the answer is no, then you must estimate how much you think you will owe and pay your own estimated taxes. These are due quarterly (approximately every three months). You still file a return at the end of the year to correct for any over- or under-payment.

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Conclusion

Being a postdoc is such a weird job category that almost nobody (including accountants) will know any of this, unless they have specific experience with academia. So don't be surprised if they are confused too!

By far the easiest scenario is if your institution pays you as a normal employee, in which case you will receive a W-2, they will withhold, and you will not owe taxes on your health insurance. I hope this is the case for you.

  • This information primarily applies to people employed as "postdoctoral fellows" who have their position funded as a training position, such as by the NIH, as a grant to that individual rather than a research grant to the laboratory. Most postdocs are not in this situation. The question asked was about "being offered a postdoc position" which is almost certainly not a fellowship. – Bryan Krause Oct 24 '16 at 21:00
  • @BryanKrause in my field (biomedical science) and at my institution the information is true regardless of whether you are paid by an individual fellowship or a research grant to the laboratory. I personally have been in both situations. But I agree that it is highly variable between fields and institutions. The only postdocs I know who are paid like normal employees are those who receive funding from HHMI, a private institution. – cxrodgers Oct 24 '16 at 21:02
  • I am also in biomedical science; thanks for the clarification. If in fact you are issued at 1099-MISC, you may have other tax advantages such as not being subject to social security taxes, etc. depending on the source of your funding. These advantages are probably greater than any retirement, etc, disadvantages you have for getting a 1099-MISC. My personal opinion would be that 1099-MISC for postdocs not funded by individual grants are stiffing the federal govt, especially because post-docs are clearly meant to be employees given the recent guidance on overtime. – Bryan Krause Oct 24 '16 at 21:07
  • If you believe you are an employee, and not a contractor, you can ask the IRS to make that determination. Universities do this to save their half of FICA, which contractors need to pay as a self employment tax. – Scott Seidman Oct 24 '16 at 21:24
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    As I mentioned on the other answer, it's possible this is not the case for some foreign nationals depending on the various tax treaties with their home countries. I wouldn't be so assertive that "you definitely will owe taxes." – tpg2114 Oct 24 '16 at 21:52
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Check your visa status first. Your visa, your country and the time you spent in US will determine what regulations are applied to you. I strongly recommend to check the international student office of your university as they generally have new tax information and they generally organize free consultation to students (undergrad, grad) and postdocs for tax forms.

Do not take automatically the advise of your American colleagues , as their situation is most probably very different from yours. Average people have no idea about the notion residency for tax purposes, and give you incorrect advice in spite of their goodwill. Most accounts has no idea about applying rules neither, as few foreign postdoc has money to pay them.

  • You used "advise" wrongly (unambiguously) and yet have the audacity to critique my English in another post? What about your bad grammar in "notion residency" and "most accounts has" and "few foreign postdoc has"? – user21820 Nov 11 '17 at 11:34

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