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Any tax lawyers/accountants in the building?

1,233 Views | 9 Replies | Last: 2 yr ago by Fightin_Aggie
CrottyKid
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AG
I am a college professor. Usually we write grant proposals, and, if we win, the money goes to the university who is happy to administer the funds after taking their share for "overhead".

However, I recentlt won a bid for some consulting work. It's not a huge chunk of money (about $30k). Since it is not a grant, I have to be the administrator my self. Here's the catch, I don't want that $30k to be taxable income since I am just going to spend it all on student labor and equipment.

I understand that I should have thought about this before, but I was in a grant mindset. What should I do to stay out of tax trouble when this agency sends me a check for $30,000?

I have thought about registering a non-profit org or something.

Is the amount low enough that none of this even matters?

Any advice appreciated.
TXTransplant
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Asking this because I used to be a professsor myself. How can you pay student labor and buy equipment unless you either go through the university (that will take their pound of flesh) or set up some sort of business that can employ the student and own the equipment?

Also, if the student is already employed by the university as an RA or TA, aren't their hours capped? Are they an international student with a student visa? If the student ends up working as your employee, won't you have to pay all of the employer taxes?

Just floating some of the complications I can think of by trying to do this independent from the university when there is student labor involved.
jwoodmd
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I'm a professor of medicine and my wife is a professor as well. We both do a fair amount of consulting. Some things you need to do:

1) your university will have a consulting authorization form you need to fill out. It is to document you are doing the work and to verify that it is not a conflict of interest with your current position
2) taxes will be by Schedule SE (self-employment taxes)
3) on SE you can list deductions/expenses like students and equipment
4) you will need to have your university authorize use of any students and university equipment (most will make arrangements to "rent" university equipment - this even includes university owned computers)
5) other things you need to consider in the forms filed with the university - you need to show why you took this as consulting and not through the university. This is usually easy by showing that the work would not be of the type that leads to a student's degree (e.g., MS, PhD, or...)

As this seems the first time doing consulting, there really is no such thing as "tax free" consulting work - you're going to have to pay some taxes somewhere.

Good luck
CrottyKid
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AG
Thanks. Great answers and good information.

To answer some of the first questions, I went to my university's grants office and asked them if this would qualify as a grant. They said it would not be considered a grant. I have that in writing.
combat wombat™
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AG
I am a CPA. I'm not particularly familiar with grants. However, I am familiar with consulting income. jwoodmd is almost right.


Where will you be depositing the check you receive for the consulting?
How will you be paying your student workers and for the equipment?
Will the proceeds of the consulting gig be reported to you by the payor on Form 1099-NEC?

Assuming that the University is not involved in any way - they don't get any of the consulting income, they don't pay the student workers, they don't buy the equipment then my GUESS is that you will have Scheduled C (not SE), or self- employment, income on your personal tax return for the year in which you receive the consulting funds. If you spend all of the money you receive on student workers (to whom you may need to issue Forms 1099-NEC or W-2) and equipment (assuming it qualified for 100% bonus depreciation) in the same calendar year that you get the consulting check then you won't have taxable income. If you receive the consulting income late in the year and you don't spend all the money in the same calendar year, then you may have taxable income the 1st year and a loss the following year when you finish paying out the money.

I HAVEN'T SEEN YOUR APPLICATION. I AM NOT YOUR CPA. TALK TO YOUR CPA.
CrottyKid
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AG
Thanks. I will talk to my cpa.
Biz Ag
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AG
Be sure you keep receipts (invoices for purchases - equipment, supplies, etc. - time sheets for hours students are paid) for all expenditures.

As long as you can substantiate all of the grant money was spent on qualified expenses there should be no adverse tax consequences for you.

Edit: I'm also a CPA, but recommend you discuss this thoroughly with your CPA / professional tax advisor.
combat wombat™
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I also recommend that you discuss with your CPA whether the student workers will be employees or independent contractors.
jagvocate
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NLRB is set to really expand the definition of employee ... a recent general counsel opinion held that private school scholarship football players are employees!

Make sure you understand the factors for employment if it is crucial they be contractors and not employees.

combat wombat™
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Why would private school football players be employees but not public school football players?
Fightin_Aggie
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jagvocate said:

NLRB is set to really expand the definition of employee ... a recent general counsel opinion held that private school scholarship football players are employees!

Make sure you understand the factors for employment if it is crucial they be contractors and not employees.
Didn't know that. Taxes are going to be an eye opener for some of those players
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