Tax misclassification packs a punch for GAs

A federal tax law has left a handful of classified graduate assistants and pre-professional graduate assistants receiving a reduced paycheck this past week ­­— some even earning as little as nothing.

This semester, 147 graduate students received reduced paychecks, with an additional 23 receiving nothing. This is fewer than the 280 students affected last semester when graduate assistants, or GAs, and pre-professional graduate assistants, or PGAs, were discovered to be wrongly classified as tax exempt under federal law in the same manner as teaching and research assistants.

The University awarded “emergency grants” last semester to select individuals after it found out it had failed to withdraw taxes from the misclassified GAs and PGAs for seven years. But Robin Kaler, campus spokeswoman, said the University does not plan to give out grants to those affected this time around. She said the University has done its best to let those affected know about this.

“We will continue to explore whether alternative withholding methodologies could be used,” she said in an email.

PGAs and GAs are taxed about 30 percent after the first $5,250 of the tuition waiver. Many being out-of-state students who receive greater waivers, this tax liability would outweigh whatever additional income they are earning while working for the University, leaving them empty-handed.

“The University ended up giving grants because we didn’t find out until the spring that this was going to happen,” said Miriam Larson, co-president of the Graduate Employees’ Organization, or GEO. “When you plan your year relying on income and find out that doesn’t happen … it’s a pretty big shock.”

Of the withheld tax, 25 percent goes to the federal treasury, 5 percent goes to the state and if applicable, 4.2 percent for social security and 1.45 percent for Medicare. Teaching and research assistants are not affected, as their waivers are tax exempt under federal law.

Kaler said reclassifications were completed last semester when it was determined that some GA or PGA duties involved teaching and research. But in order to be considered for tax exempt positions, one’s duties must center on one of those two, she said.

University guidelines classify graduate students GAs and PGAs if their duties are not primarily of instruction or research. According to the GEO, most universities do not face this issue because graduate employees are classified as either teaching or research assistants at their universities.

Lindsay McCullough, a PGA working at the Career Center, said she is upset that the University is changing how it has handled this situation in the past.

“They (the University) told us a week ago, which is even more frustrating, that (it is) taking it out of two checks versus three checks, which to me taking it out of three checks would be easier because I was financially planning on that,” she said.

The GEO said it has talked with Illinois legislators to encourage them to work on changing this law.

“I think particularly in cases where people get zero dollar paychecks: it’s essentially doing volunteer work,” Larson said.

In addition, she said the plan for the near future is to take some of their concerns, such as the classification of appointments, to the University.

“I would like to see the University be much more proactive in making sure people understand what it means and litigating the effects for a relatively small group of GAs and PGAs,” Larson said.

Tom Hardy, University spokesman, said this will continue to be an issue unless the Internal Revenue Service changes its tax code. He added that he does not think this law will drive away graduate students from the University.

“These are valuable tuition waivers. For most, it’s the value of the educational experience,” he said.