Sigma Pi Educational Foundation (“SPEF”) may grant a Scholarship, Fellowship, or qualified Chapter Educational Fund (“CEF”) Disbursement to be used to further educational pursuits. The taxability of these monies depends on how the disbursement amount is used. Qualified scholarships, fellowships, or CEF Disbursements are not taxed when used by the recipient for qualified tuition and related expenses. Since disbursements may be used for these purposes, the IRS does not require SPEF to withhold taxes, send a Form W-2, or send a Form 1099-MISC at the end of the calendar year.
If the Disbursement is sent directly to the University’s Bursar’s Office, no further action will need to be taken, as receipt by the University is a qualified disbursement. If the Disbursement was sent directly but made payable to the University for the benefit of the named recipient, then the check will need to be delivered to the Bursar’s office for proper application to an account. However, if the disbursement was made payable directly to the recipient, then the recipient should be aware that to avoid income tax liability, it is important to use these monies for qualified tuition and related expenses. Generally, this means tuition and fees required to enroll or attend a college or university, or fees, books, supplies, or equipment required for courses at that school.
Note that use of the award for non-qualified types of expenses, such as room and board, travel costs, or other living expenses will change this scholarship (or at least the portion related to these non-qualified expenses) from non-taxable to taxable. In addition, if the University directly or indirectly pays any other expenses related to this award on the recipients behalf (such as rent, transportation, or other living expenses), these would be considered taxable (but not reportable by SPEF).
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