In this episode, Emily interviews Jack Mao, the founder of Tax Fellows, a nonprofit organization that prepares pro bono tax returns for Stanford students. Tax Fellows primarily serves first-generation, low-income undergraduate and graduate students, and has a special focus on the tax implications of receiving scholarships and fellowships, such as the Kiddie Tax and estimated tax payments. Jack shares the advocacy approach he’s taking to reform the Kiddie Tax at the federal level and lists ideas for how graduate students across the US can bring more attention and resources to resolve their tax pain points.

Links mentioned in the Episode

Addressing Fellowship Tax Pain Points through Education, Resources, and Advocacy

Teaser

Jack (00:00): Where students aren’t being told to expect significant tax liability on their stipend checks and like making sure that they save money for taxes. There’s no, you know, mechanisms like withholdings where the schools will pay the taxes on the students’ behalf. And so the students just kinda have to like figure it out and learn the hard way during their first tax season. And I feel like, you know, that’s not really the way to go. That there definitely needs to be a lot more resources across all the universities in the country to really help educate these students on their tax liability and really help support them through it as well.

Introduction

Emily (00:54): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:24): This is Season 17, Episode 7, and today my guest is Jack Mao, the founder of Tax Fellows, a nonprofit organization that prepares pro bono tax returns for Stanford students. Tax Fellows primarily serves first-generation, low-income undergraduate and graduate students, and has a special focus on the tax implications of receiving scholarships and fellowships, such as the Kiddie Tax and estimated tax payments. Jack shares the advocacy approach he’s taking to reform the Kiddie Tax at the federal level and lists ideas for how graduate students across the US can bring more attention and resources to resolve their tax pain points.

Emily (02:04): The tax year 2023 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. You’ll hear me reference this workshop once or twice during the interview. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. Go to PFforPhDs.com/taxreturnworkshop/ to read more details and purchase the workshop. By the way, it’s never too early to start laying the groundwork for university sponsorship. If taxes are a pain point for you, please let the administration at your university know that you would like them to provide additional resources either during next tax season or near the beginning of the academic year, as Jack suggests near the end of the interview. I can license one or both of my asynchronous workshops or deliver a live seminar. Please cc me ([email protected]) if you decide to recommend me! You can find the show notes for this episode at PFforPhDs.com/s17e7/. Without further ado, here’s my interview with Jack Mao of Tax Fellows.

Will You Please Introduce Yourself Further?

Emily (03:40): I have a really special guest joining me on the podcast today. His name is Jack Mao and I’m going to let him introduce himself to you further in just a second. I just wanna say how we got connected, which is that I have been working with Stanford this past tax season to provide my tax workshop to their graduate students and postdocs, and Jack started an organization at Stanford called Tax Fellows. The more serves on the undergraduate side, but definitely some overlapping, um, interests in populations between our two. And so because of our mutual collaborators at Stanford, we got to talking and just had an absolutely fascinating conversation and I knew that I had to bring him onto the podcast. So Jack, we’re gonna get into your whole background, but just really briefly, can you tell us who you are and what you’re up to right now?

Jack (04:23): Sure. Uh, thank you so much for having me on the podcast here, Emily. Um, my name’s Jack. I am, I was a Stanford student, uh, until recently. And, um, I’ve been also a credentialed tax professional, uh, federally credentialed for the past, uh, couple years, but in the industry for about six years so far. Um, and yeah, it serves a lot of, um, you know, college students, that’s kind of my strong suits and so it was natural for me to just kind of start Tax Fellows, uh, in partnership with the IRS and few Stanford offices to help out other college students with their taxes.

Emily (04:58): Yeah, and this is a really unique organization. I haven’t found one like it at any other universities I’ve collaborated with. So I wanna hear more about that. But first I wanna get a little more background on you, Jack, and sort of how as an undergraduate student you became interested in income tax and ultimately, you know, that led you to starting Tax Fellows.

Jack (05:16): Sure, sure. So, um, my background is actually in computer science and so totally different than, you know, tax, um, and accounting. But, um, it was back in high school I was, um, so I come from a low-income background and I was trying to start a small business to help out with family finances. Um, and at the time I just had, you know, my McDonald’s paychecks to pay for everything, which wasn’t really enough to, you know, pay for, uh, you know, accountants or, uh, lawyer’s advice. So what I did was, yeah, it’s a good CS major or do just Google everything. Uh, would not recommend unless you plan on switching ma- uh, you know, majors in industries, um, or careers. But, um, yeah, um, Google, everything. Really loved. Uh, just the way the taxes works, you know, I hate paying taxes, but it’s just, you know, it allows you to have a lot of creativity and flexibility and kind of, uh, finding ways to get around taxes you don’t really want to pay, uh, at times. Uh, and so that was really fun. I really want, uh, go more into it and to decide to volunteer with the IRAs VITA program, um, that works with nonprofits, uh, to provide free tax services to income taxpayers. So been, uh, in that program ever since, uh, and still am in that program, uh, through Tax Fellows today.

Volunteer Income Tax Assistance (VITA) Program & TaxFellows

Emily (06:37): So can you explain a little bit more what the connection is between the VITA Program and Tax Fellows? Is it exactly the same? Is there, is there more to it?

Jack (06:45): Sure. So, um, originally we started out just as a VITA site. And so Tax Fellows is a 501(c)(3) nonprofit, it’s a standalone nonprofit, um, that’s separate from Stanford, but we partner with the IRS, where the IRS helps us provide some training, some overhead and, you know, oversight, um, and helps us source a lot of our volunteers as well. Um, but now, now that Tax Fellows, um, has finished their first year and joined to our second tax season, uh, we have been expanding our programs a little bit, um, to also provide a additional pro bono, um, program called Tax Advisors, where we have our credential tax professionals, um, on a team prepare more complicated tax returns for undergrad students with kiddie tax, uh, obligations, uh, just because that is something that is outside the scope of VITA program. Um, and so we couldn’t prepare those in the past. So we kind of are in a way, um, half pro, uh, VITA sites and half a kind of a pro-bono tax in a sense. Um, and so, uh, but you know, we do have a pretty good partnership with the IRS and a few, uh, good stakeholders in the area.

Emily (07:59): And just for the listeners who aren’t familiar with VITA, maybe they’ve never been to, you know, access to services that are available to them at their university or their library in their city or whatever, can you explain like who that program is for?

Jack (08:10): Sure. So Tax Fellows, um, is, uh, or just VITA program in general, um, is for low income taxpayers, um, who might want some, you know, additional help with their taxes, um, but, you know, um, might not be able to afford say, a tax professional. Um, and so VITA sites, they are run by nonprofits at IRS, uh, partners with, uh, usually and, um, they’re staffed by volunteers, many of whom are credential professionals or retired professionals, but a lot of whom are also just newer, um, folks to the industry who want to get some more experience. That was kind of how I got my experience, um, with taxes and, uh, just kind of, uh, having the IRS, you know, train them, uh, on the volunteers on, you know, these basic tax topics so that they can, um, help prepare your tax returns for you, uh, at no charge. Um, these are all out of the volunteers, uh, generosity, um, of their time. And so, um, but it’s a really great program, um, with a lot of guardrails so that, you know, um, the quality control is usually pretty high. Um, and, um, yeah, yeah, definitely a really great program for anyone who makes under around $64,000 every year, um, and have fairly simple, uh, situations, uh, to get their taxes done, uh, really great and for free. So

Emily (09:39): I’m so glad you mentioned that number. ’cause in a lot of the country people are making less than that amount of money, so it really covers, yeah, a broad swath of people, especially my population graduate students, even some postdocs will fall under that, um, level of income. So they can almost always, if they have a VITA site available to ’em, access those services. And I’m really glad you just mentioned, you know, there’s, there’s guardrails there. Um, there’s only, you have to have a simple tax situation to really benefit. And that’s why you mentioned earlier that you started this tax advisors wing of tax fellows. Let’s talk a little bit more about some of these like confusing tax issues that may be common between like the first generation low income population that you serve, and then the funded graduate students and potentially postdocs population that, uh, that I serve.

The Kiddie Tax

Emily (10:22): So you, you mentioned the kiddie tax, um, let’s brief overview right now about what the kiddie tax is for anybody who has the, uh, misfortune of hearing about this for the first time.

Jack (10:32): Yeah. Yeah. So, um, kiddie tax originally, um, the inspiration behind that, uh, on the legislation side was, you know, a lot of these high net worth individuals, uh, your parents especially would, you know, have pretty high marginal tax rates. What they would do is, you know, have tax professionals who would kind of find all these little loopholes. And one of them is, you know, they could just pass along their investments to their children who are basically making no money, right? Uh, especially if they’re a minor. That way they could both save on taxes, Congress didn’t like that. Um, and so they implement kiddie tax where if, uh, the child is a minor, uh, or a full-time student who didn’t, uh, you know, earn, uh, from a job, uh, so earned income, um, more than half of their living expenses, then they’re considered basically, in a sense a soft dependent of their parents.

Jack (11:33): And so any unearned income that the child has now, uh, will be taxed at their parents’ highest tax rate. Um, and so, uh, that way, you know, the richer parents can’t just pass on their investments, uh, through their children because they’ll be tax rate basically. Um, unfortunately the way Congress defined kiddie tax, um, was very broad. And so it also encompasses, you know, college students who have, you know, taxable scholarship, financial aid, uh, you know, fellowships where, uh, you know, if they don’t have earned income from a job that’s more than half of their expenses, especially at, you know, Stanford where cost of tuition and like the, um, the room board are like an 80 to a hundred thousand dollars every year, uh, if not more. And so the student, not only do they have to like work a, you know, um, full-time job, you know, making more than 50 K to get outta it, uh, it is just a lot of qualifications and so too much complexity. Um, and that’s kind of, um, one of the biggest reasons why, um, we’re so popular at Stanford as while just helping students navigate, uh, through all this complexity.

Emily (12:52): Yeah, that makes sense. And this hits my population all the time. When you’re receiving a fellowship, one of the things about the calculation that goes into the kiddie tax is that your expenses include your education expenses and not just like your living expenses. So that scholarship that goes towards paying your tuition, the cost counts as part of your living expenses, but the scholarship that pays for it doesn’t count on like your side of the ledger of like providing half of your own support. Exactly. Exactly. So, right, so like they get hit with this fellowship, um, issue too. Now, what was interesting about the kiddie tax, I think I read into like the history of this and it seemed like there was like a creep going on. Like at first it was just minors, then it was up to age 19, then it was now it’s students, um, up, up, up until, you know, through age 23, under age 24.

Emily (13:34): And so over time it kind of like expanded and expanded. Um, but there was a reform a few years ago with the Tax Cuts and Jobs act that attempted to, um, make some changes to the kiddie tax. Mm-Hmm . And it really hit your population, that low income population because what they did was they, for a couple of years changed the definition so that, um, no longer were you taxed at your parents’ highest marginal tax rate, but you were taxed at the marginal tax rate for trusts, which simplified things certainly because you would just look at a table and see where you fell on that instead of having to, you know, link your tax return with your parents. But if your parents were low income to begin with, maybe that kiddie tax was not so big of a bite. Now, if your parents were high income, of course it was a big bite, but because it really, really increased those marginal tax rates on those low income populations, there was a big outcry. And after a couple of years, I think it got shifted back to the old model of go to your parents’ tax rate. So that was, yeah, just some interesting like shifts that happened with end time. But yeah. Yeah, the kiddie tax is a very unpleasant thing to find out about.

Commercial

Emily (14:33): Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Paying Estimated Taxes as a Graduate Student

Jack (15:38): Oh yeah. So, uh, especially for like first year grad students, uh, who have like a lot of taxable stipends ’cause they get like stipend checks, uh, usually and, you know, they would owe a pretty significant amount of taxes. Uh, and so to, to a point that they definitely need to pay estimated taxes, not only like to avoid the underpayment penalty, but also to, uh, just not be surprised at the tax bill end the year and try to like, try to recoup all the money, um, to pay, uh, substantial tax liability. And so, uh, we’ve been educating, um, grad students, um, as they come in, especially the first year grad students, uh, kind of how to pay estimate taxes. ‘Cause we also have California and they have like, their kind of special snowflake. They have like very, um, specific percentages, um, where it’s like 30%, 40%, 0%, 30% for like, the amount of estimated taxes that need to be paid.

Jack (16:31): Federal is like pretty straightforward. It’s just one fourth of the tax every quarter. Um, but just kind of educating students on like how to pay those, uh, payments, trying to figure out, um, how much to pay. Uh, and then kind of repercussions if they don’t, uh, pay as many taxes. ’cause you know, uh, students they could be busy and so, uh, you know, I’ll just kinda let them decide based on all the facts available, like whether um, it’s worth the effort of doing as many taxes. Usually it is, ’cause like usually if you don’t do it, um, for students that we have, um, served, their penalties are gonna be around a two, $300 range, uh, in this economy with, uh, the inflation. ’cause the penalties really based on just interest, um, and the interest rate that r assets for, you know, all, all their penalties and interests and, um, it’s just prorated across the year, uh, based on the, um, estimated tax payment you’re supposed to make, uh, from that date on, um, to the tax season. And so right now, uh, usually the past the rate was like 3% and so it wasn’t too bad, but right now the rates are in a 7% range. And so it’s definitely significant.

Emily (17:44): I found that as well that a lot of graduate students are aware of the estimated tax issue, but they just choose to not address it until tax season. And if they go into that with their eyes open, of course that’s their decision. But, uh, like you, I just try to lay out, okay, this is the trade off if you decide you’re going to neglect this.

Jack (18:01): Yeah. Yeah.

Emily (18:03): I think the real tough part is ra- facing that, you know, multi-thousand dollar tax bill that you exactly may not be prepared for.

Jack (18:10): Exactly. Because, you know, yeah. Students are also taxed on your part of the fellowship that goes to room board and room board in the Bay Area is pretty significant. Um, and so not only do students have to usually save for taxes on their stipend checks, you also have to like figure out, um, how much tax to save on housing, uh, stipends and some of the other stipends. And I feel like, you know, right now there’s not really a good way for the students in general, I feel like maybe it’s just more of a lack of re- uh, educational resources in the first place, um, where students aren’t being told, uh, to expect significant tax liability, um, on their stipend checks and like making sure that they save money for taxes. Um, there’s no, you know, mechanisms like withholdings where the schools will pay the taxes on the student’s behalf and so the students just kinda have to like figure it out, um, and learn the hard way , uh, during their first tax season. Um, and I feel like, you know, that’s not really the way to go. Uh, that there definitely needs to be a lot more resources, uh, for across all the universities, uh, in the country, uh, to really help educate these students on their tax liability and really help support them through it as well.

Emily (19:27): Yes. You know, I agree with you of course ’cause this is one of the main missions of my business, but, um, we’ll talk more about how people can sort of get more resources and get more education to their own peers, um, later on. But I just wanna add on that point. I mean, Stanford, obviously, you and I are both working with people at Stanford, so like Stanford’s obviously making a pretty, a relatively large effort in this area. Sure. Um, to get people informed about this. But I, it’s, um, I do not see this at this degree of resources being offered at many other places, which is to add, but I will tell you that there are a couple universities I went to one Duke, um, where they actually did offer income tax withholding on fellowships. I don’t know how or why it happened. I mean, the paychecks were being processed through payroll instead of through financial aid.

Emily (20:10): So there was a mechanism for doing it. Um, and it did generate a weird tax form. We got a 1099 miscellaneous instead of a, you know, 1098 t or whatever. Sure, sure. Yeah. Um, so it caused some downstream tax complications, but they did offer it. So that is something that I know is happening at some places and maybe it could happen at more places and it would certainly be easier on the students than having to engage with the estimated tax system. So Now that we’ve kind of talked about, like, you know, this example of the kiddie tax, how the kiddie taxes changed with time, um, how advocacy actually around after the pa after the passage of the Tax Cuts and Jobs act, when, you know, the tax rates were jacked up for these low income families, there was an outcry and it was reversed. I want you to give us a few examples, if you don’t mind, of Yeah. Some things that have changed within the tax law over time, uh, that relate to students, just so we can see some examples of like, this is not completely static, like these things do change.

Advocacy Around the Kiddie Tax, Taxable Scholarships, and Other Niche Financial Issues

Jack (21:02): Yeah, yeah. So, um, right now we’re actually trying to do some advocacy, uh, around the kiddie tax and the taxable scholarship arena just because, uh, it is, I’d say slightly outdated, uh, set of tax law. Um, you know, it was most recently updated back in, uh, the 1986, um, uh, tax changes. Uh, there, there were some major tax changes back then, uh, and never since, like since then, like I’d say like the, just the way scholarships and financial aid work, especially at like, you know, expensive private universities like Stanford, uh, and like the Ivy League, um, like it tuition has just gone up significantly where I don’t think it really makes sense anymore to put a lot of that tax burden on students. Um, and without any, like, you know, as you mentioned, like, uh, stu- you know, schools have to like put withholdings on a 1099 miscellaneous.

Jack (21:59): Um, so like, there’s not really like a, a mechanism say on a 1098 t or another like educational oriented form, um, to really help students, you know, save a little bit on their taxes, um, you know, having those taxes being taken out already. Uh, and so we’ve been, uh, trying to do some advocacy around their, uh, you know, the legislative side who’ve met with, um, the late Senator Feinstein’s office, uh, and representative Eshoo’s office, uh, who represents the district Stanford’s in, um, to kinda discuss about, um, you the struggles that students are going through with K tax and, uh, especially like undergrads as well, where they don’t get stipend checks really. Um, but even the in kind aid for, you know, room and board, you know, especially on top of like internship income, that is pretty significant. Uh, burden, you know, we typically see like about two, two, $3,000 of burden on in-kind aid, so money that the student never sees.

Jack (22:59): Um, and so they have to like work a, you know, good like on-campus job just to pay the tax on again, money that they never see. And so it, it’s a struggle. I mean, um, we’ve been, um, able to help the students save a little bit on taxes, you know, optimize, uh, with the parents, uh, so that we dumb it down to about, uh, a few hundred dollars, but even a few hundred dollars is pretty significant for these income students. And so we’ve been really help, um, working with in these, um, legislators, um, on, you know, ways that we can really change the tax around us. Um, and, you know, the judicial side as well, trying to poke holes and, um, kind of, uh, tax code surrounding, uh, these topics, uh, through tax court. Uh, and we might even, um, do some advisory, um, and meet with advisors through, uh, President Biden’s office, uh, very soon here. Yeah. Even on this, uh, university side as well, uh, you know, trying to get, you know, support fund going for, uh, you know, students to pay their tax liability, uh, especially in the first years where they might not expect such high liability, uh, and it would be, you know, challenging for them to pay those liability. Uh, but it’s been, it’s been tough working with Stanford, um, for now. Uh, but we’re still keeping at it and, and we’ll see kind how it goes, uh, over time. Yeah,

Emily (24:30): I think the kiddie tax is such a great example of an issue that’s right for change, just because, you know, the way you explained it earlier, which is the way that I understand this as well, is the original, um, conception of the kiddie tax was to make it less advantageous for high net worth parents to pass assets, income generating assets to their children. And that is not at all what is going on with scholarship and fellowship income. It’s, it’s perplexing to me how scholarship and fellowship income even got tied in with investment income in the first place. Yeah. Yeah. I, it’s, it’s completely baffling to me. Yeah.

Jack (25:04): Well, I mean, even with leg- legislators, uh, you have with, uh, it’s been, uh, it’s been challenging for them to just, I guess like, um, everyone has, um, like especially legislators have, you know, lots of, uh, different priorities that they need to kind of first, um, solve. And so I guess we weren’t too high on the set priority list. Uh, I mean, hopefully they’re, that they’re working on it, but, um, it, it’s, it’s, you know, a lot of politics as well. And so it’s a, it’s gonna be a long game, but, um, we we’re pretty committed to, you know, doing long-term advocacy around this, um, gonna go at it, um, as long as this is a thing, uh, and, you know, just some interesting, uh, statistics as well. So, um, you know, yeah, can tax, like, as you mentioned, like it’s definitely for, you know, these high level worth parents, uh, and their children.

Jack (25:58): And so typically the median, uh, an average income that we see for, um, you know, students or just children who have to fill out the kiddie tax form 8615, the me-, uh, the average parents income is actually in a, uh, about $1 million, uh, taxable income. A lot of these low income students, their parents are not making a million dollars . Um, and so like, yeah, this is definitely unintended consequence of the way legislators wrote the tax. Uh, and even for taxable fel- um, scholarship fellowship in general, uh, it’s heavily under-reported, uh, only about $4 billion of taxable financial scholarship and fellowship are, is being recorded. Uh, and so it, it’s, you know, it’s an area of the tax field that, you know, Congress and IRS isn’t really making a lot of money, um, in, in the first place. Uh, and so, uh, you know, using those arguments, you know, we’re hoping to really push along the change a little quicker, uh, especially ahead of the upcoming, uh, sunset of the TCJA, uh, Trump, uh, the Tax Trust and Jobs Act, uh, back when President Trump passed it, uh, just to kind of see if we can push along, um, uh, as a rider on, uh, those big tax bills that are coming up soon on the Congress side.

Jack (27:24): So, so we’ll see. We we’re, we’re definitely, uh, steadfast our commitment, uh, to advocacy here.

Emily (27:30): And I mean, I’m, I’m so excited about this and I hope you keep , keep it up and everything, and I’m just, um, I’m really inspired by like the story of how the definition of taxable compensation change for the purposes of contributing to an individual retirement arrangement. Because that also seems like a very, very tiny niche issue, right? The, the Graduate Student Savings Act to, if anyone is not familiar, it used to be that fellowship income not reported on a W2, was not eligible to be contributed to an IRA. And this was proposed, you know, federally several times in terms of the Grad Student Savings Act to change this definition so that it could be, and it failed several times until it finally got rolled in with the Secure, the Secure Act in 2019, and it was passed. And like, again, it was a thing that mattered so much to like my population, um, and it was amazing that it passed.

Emily (28:17): But yeah, that’s a really, really niche issue. And hopefully, again, some of these other niche issues like the kiddie tax can be addressed too. I actually have one more example. Yeah. So the tuition and fees deduction, they tried to eliminate that over and over and over again, and it kept being like resurrected year after year. It’s finally gone now. But again, for the listeners who were not in graduate school, maybe a few years back, yeah, there are currently three higher education tax benefits, but there used to be four available. The fourth one was the tuition fees deduction. Yeah. And it was the least useful and valuable one, and it ended up, I mean, the reasoning why they kept a congress kept trying to sort of sunset that particular de deduction was that it ultimately just confused people more. And so people would take the tuition fees deduction Mm-Hmm. when really one of the credits, for example, might have been better for their tax liability overall. Mm-Hmm. . So my understanding was it was causing more confusion and they just eliminated it. And it, it kind of sounds bad to like, oh, eliminate a deduction that was available to you, but really there were better ones avail better credits available. Yeah. Yeah. So that was another, I just kept watching it year after year being like, okay, it’s finally gonna die. No, they brought it back again, finally. Now it is gone.

Jack (29:24): No. Yeah, yeah, yeah, it’s definitely confused. Uh, so the students I’ve served in the past as well, um, and like there’s just, I think there’s a lot of different ways Congress is, uh, trying to help with education expenses, uh, through tax code, but, uh, you know, I don’t think, you know, with the taxable financial aid, fellowship scholarship, uh, section, um, there’s definitely a lot more potential there, uh, for, uh, you know, change. And so we’re definitely, uh, um, hope that Congress can, you know, really take up our word. And there’s definitely a lot of other nonprofits like us, uh, that I’ve met with who are also advocating for same thing as well. Um, you know, typically we don’t really see audits rates that high, especially for students. But even then, you know, none of my clients have gone on in knock on wood, uh, yet.

Jack (30:16): And so, uh, but yeah, I’ve definitely heard from a lot of these other nonprofits, some of the students that we’ve been working with. You know, there’s one, uh, one of the organizations that was, uh, serving foster youths, uh, that I met with, and one of their foster youth got audited on their taxable financial aid fellowship, uh, scholarship. And the outcome is not pretty. Um, so, uh, it’s definitely, uh, one of the biggest and one of the most urgent issues that we’re trying to tackle. Um, not only on the legislative side, but also, uh, just kinda on university side as well. Just especially the, um, private institutions like Stanford and, uh, the Ivy League. They have a lot more resources that they can more easily deploy. Um, and, you know, that’s quicker than, you know, trying and, you know, make change on the, uh, policy side of things. But yeah. We’ll, we’ll see.

How Graduate Students Can Advocate for Tax Related Resources at their Universities

Emily (31:11): Do you have any ideas about how graduate students at other universities can, um, do any kind of advocacy work or just ask their university for anything that would help them sort of gain more resources or, um, education or anything that would help them on this, you know, in, in tax season to, to handle things a little bit better? So like, what can they, maybe not, of course, founding a whole organization like you did but some little things they could do at their university to get some more attention to these issues.

Jack (31:39): Yeah, that’s great. Um, I think, uh, you know, for example, let’s say your podcast and kind of your resources are great, you know, great starting point. Uh, you know, one of the partners that we’ve worked with at Mutual Partners here, uh, Mind Over Money, uh, they’ve, uh, spoke really highly of your resources. And so that’s definitely a great starting point and just kind of advocating for universities to, um, kind of, uh, provide resources and kind of distribute resources, um, across, uh, campus. But also I think like, you know, while not, you know, maybe not founding a whole, you know, uh, tax program from scratch, but, you know, if a university has a law program, uh, then definitely would recommend, you know, working with Senate faculty there, uh, to try to set up, uh, maybe in con- conjunction with United Way usually has, uh, VITA programs already set up. And so just kind of, uh, using existing infrastructure in support of, uh, VITA sites and just kind of start, you know, a small one. It could be a small one, just trying to start out, um, kind of helping other students through their taxes, um, and then trying to attract like, you know, tax professionals and lawyers to the organization.

Using Caution When Getting Tax Help as a Graduate Student

Emily (32:47): So I observed with the VITA site at Duke, um, sure. Sorry to speak against them, but, um, yeah, they were not preparing returns properly with the weird fellowship stuff that was going on at Duke. I see. So I would just say whether there is a VITA site or whether you wanna start one, make sure that they know the population that’s gonna come in and the questions that they’re going to have so that they can train their volunteers specifically towards the situations that they’re going to see Now, because of the weird way that Duke did things, like I actually understand why the mistakes that were made were made, and it might be easier at other places that don’t use the 1099 miscellaneous. Sure. Yeah. Um, but yeah, just to let them know like, Hey, I’m gonna tell all my friends to come in and like, make sure that your volunteers can do this Sure. Correctly and easily and quickly. Definitely.

Jack (33:29): Definitely. Yeah. I mean, we don’t really see a lot VITA sites and universities, uh, where we really should. But, um, even a lot of, uh, sites that I’ve seen, um, at universities, you know, I’ve kind of had a connection with Yale, um, and I wanna say, uh, UC, uh, Santa Cruz as well, uh, in California, uh, they, I I wanna say a lot of them only serve low income tax payers that are not students. Um, and like they don’t orient these services to students, which I think is a good approach, especially if they’re newer site starting out, uh, and not have a lot of those more experienced volunteers, uh, or professionals to kind of guide, you know, the volunteers. But yeah, you, you mentioned a really great point, uh, which is that like, you know, not all VITA sites and even tax professionals I’ve worked with in the past, you know, who have like decades of engineers, not all, you know, professionals or VITA sites, understand, um, kind all the ins and outs of the tax code that are relevant to students.

Jack (34:33): Uh, I’ve even had tax professionals think that, you know, taxable financial is not taxable , um, that was, that’s the you highest extreme I would say. But, uh, even just like optimizing, especially for a lot of undergrad students, optimizing, you know, the, um, you know, parts of the tax, you know, involving, you know, like tax credits, you know, deductions, you know, against their financial aid, uh, and along with their parents, you know, their parents who might be, you know, claiming for example, like the earned income tax credit, um, or the premium tax credit for health, uh, insurance or a lot of other tax credits and just like coordinate the, uh, tax credits that both the students and the parents are claiming, uh, to maximize those resources that that takes a lot of expertise, uh, to do correctly. Um, and so I definitely agree with you there.

Jack (35:25): Um, definitely do be careful, um, with, you know, starting VITA sites, uh, and with just tax professionals in general, just making sure that they actually have the expertise, um, and experience serving students, uh, in order to serve you, uh, you know, better and more accurately. And so I think our, our, uh, you know, tax fellows, um, uh, program, I’m very glad I’m able to, uh, you know, help students, uh, using their expertise. Um, and you know, we’ve been invited, uh, to train other volunteers at other VITA sites, uh, in these student tax considerations. And so, you know, if you’re thinking of starting VITA site, uh, please do reach out, uh, to us at Tax Fellows. Uh, happy to kind of, um, kinda walk you through the steps of starting VITA site, uh, and managing a VITA site, but also kinda allow of the student tax, uh, considerations that, uh, you should think about and kind of consider and, you know, we’ll do some more practice together, uh, on it too.

How Universities Can Support Graduate Students Around Taxes

Jack (36:20): But yeah, I think just in general, um, working with university administrators, uh, and the folks who, uh, you know, run orientation programs to add another orientation session might be just, you know, even if it’s just like one hour long, um, just to kind of prep students for what they should expect with taxes. You know, a lot of these like, you know, big picture, you know, policy changes, you know, like, uh, university like, just kinda like resource changes. Those take time. But I think you just adding another program to orientation, uh, for new students, that’s a really good first step that I think doesn’t take too much convincing to do and will be really effective, uh, to really help students, um, kind of foresee what they should expect at tax season, uh, so that they don’t have to, uh, you know, get surprised, you know, kind of play the game of Russian roulette and like try to, you know, guess and pray, you know, for the best I guess. Yeah.

Emily (37:31): Yeah. And I’ll just have to do a self plug because I have a session like that that’s ready to go. It’s perfect for orientations. It’s live, it’s awesome. Um, yeah, so those of you who are listening, if you, if you want me then please, you know, reach out to me, reach out to administrators at your university. But I would actually say just even back up from that, um, yeah, just talking about the issue of, or like the struggle that people that you’re having with your either preparing your tax return or dealing with your estimated tax or whatever it is, just telling the faculty and the administration that you have concerns about this and you want them to provide resources to you is very, very helpful. Um, because a lot of universities are super reticent to touch taxes with a 10 foot pole because of perceived liability issues on their end. Now it’s kind of funny because they, they do help international students to a great degree. They don’t usually offer the same kind of help for domestic students. Um, but if you tell them repeatedly and get a lot of people to tell them that you want more resources around this, then that’s, I think, the best they can figure out how they want to meet that need. But just letting them know that that need is there, that that concern is there is a wonderful first step.

Jack (38:34): Definitely. Definitely. Yeah.

Best Financial Advice for Another Early-Career PhD

Emily (38:36): Okay. So Jack, thank you so much for giving this interview. It’s been wonderful to speak with you. Yeah, thank you so much. And I want to end with our last question. Sure. Which is, what is your best financial advice for a funded graduate student or an early career PhD? And it can be something related to taxes if you want. It could be something that we’ve talked about during the interview, or it could be something completely different.

Jack (38:56): IRAs, I cannot emphasize enough how important and just like life changing that IRAs could be. Um, you know, there’s definitely, you know, for, you know, especially grad students, uh, PhD students, uh, you know, once you, you graduate, you, you might go into academia, but if you go into industry, uh, where you’re getting paid, you know, six figure salaries out-, out the door, it’s gonna be, you know, you could still contribute to say like a Roth IRA, but uh, it’s gonna be a bit more difficult and there’s like backdoor stuff to consider. But um, you know, now is the best time for a lot of, you know, grad students with their income level to contribute to Roth IRA while they still can, uh, easily. And you know, once the money is in, it’s a basically tax free, um, forever, uh, you could invest in, you know, stocks, you know, um, even occasionally startups, if that’s kind of your thing.

Jack (39:58): You know, I’m a little biased. I, I, I’m running a startup and like Stanford really good on startups, but, uh, you, that’s how you know folks like for example, Peter Thiel, um, have, you know, so much money that’s tax free is because he was able to contribute while he was, um, having lower uh, amounts of income in his early days. Uh, and then, you know, once the money’s in, there’s a lot of flexibility, uh, and ways to really help maximize your investments. Uh, while at the same time not having to kind of hinder the compounding growth of this investments with tax payments, yet I have to make, um, you know, on like dividends or interest or whatever. And so, yes, definitely Roth RAs is big and like, you know, lot students are also younger as well. And so the growth potential for those Roth IRAs across, you know, 46 years is gonna be huge. Uh, and so definitely do look into Roth IRAs as soon as you can contribute as much as you can, uh, ’cause you know, later down the line, uh, your future self will definitely thank you for it.

Emily (41:04): Absolutely could not agree more. My current self, thanks my grad student self were contributing to my Roth IRA back then. Not to put an even finer point on it, you know, as a graduate student you’re probably in the 12% federal marginal tax bracket and you may never see that one again. you maybe exactly, you know, above that for the rest of your career. So like exactly, that is the time to do it and it’s incredible and I love this advice because it’s both tax and overall financial, um, advice and it’s wonderful. And Jack, again, thank you so much for coming on the podcast.

Jack (41:34): Yeah, thank you so much for having me, Emily. It was great, uh, chatting with you.

Outtro

Emily (41:48): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

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