- quote -

The government doesnt care about your intention. Unless you
are a registered student at some institution, which can have
some tax advantages (and why many postdoc are technically
registered as students), you are essentially a self-employed
person. Whether you do this via schedule C, or incorporate
for profit or non-ptrofit isnt going make a whole lot of
difference. You can still write off all your research costs
such as publication, office expenses, conference travel, and
health insurance premiums. The remainder which goes toward
yourself will be subject to income tax and (both halves)
self-employment tax.

Schedule C is the simplest method.

I was a "gypsy" (independent) scholar at some time myself. I
mixed income from grants, teaching & tutoring, consulting
projects to business and publication royalties. All income
sources were pretty much the same: you deduct the expenses
of your career and pay income & self-employment on the
remainder. Some people will not report small pieces of
income that dont appear in a 1099 form (e.g. tutoring) and
avoid tax there, but that technically "wrong" and at your
own risk.

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- quote -

See the discussion in IRS Publication 525 about taxability
of Nobel, Pulitzer, etc prizes. If the prize or grant is
payable to a nonprofit 501(c)(3) organization (presumeably
an educaiton organization) then the funds spent directly on
the research and education escape taxation. If you are paid
out of this money that portion would be taxable income to
you, but the amount spent for equipment, rental space, etc,
escapes taxation.

If the grant is not paid to a 501(c)(3) then it is taxable
income and perhaps you can file a schedule C and deduct
certain expenses, and arrive at a similar outcome.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Thanks very much.

The goal of my research is simply scholarship, so it looks
like I should apply for nonprofit status. I mainly want to
be able to use part of the grant for travel to conferences
and maybe buy a new laptop for my research.

Given the substantial paperwork involved, can you explain
what the advantage to me to file for 503(3)(c)?

Thanks,

revheck

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No, a research grant is not a prize. He is basically a
self-employed consultant. He'd use schedule C to run his
research as a business. He could deduct conference travel,
publication costs, computing fees, some health insurance
premiums etc. Sometimes a grant will specifically proscribe
the amounts for these costs. He'd have to pay full
self-employment tax and income tax on the salary part.

If the consultancy becomes more complex, e.g. sells
software, hires an assistant, builds a lab, and so on, there
may be tax advantages to incorporating. There are books that
describe ways of being a consultant.

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"revheck" <revheck[at]linuxwaves.com> wrote:

- quote -

Publications - Sole Proprietor/Self-Employed

a.. Publication 334, Tax Guide for Small Business
b.. Publication 505, Tax Withholding and Estimated Tax
c.. Publication 533, Self-Employment Tax

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- quote -

Your best bet is to interview 2-3 tax specialists and pick
one to work with. There are too many variables to try to pin
down over the internet.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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revheck <revheck[at]linuxwaves.com> wrote:

- quote -

See IRS Publication 525 for its discussion of Nobel or
Pulitzer prizes or similar.

Basically you could establish a charitible organization for
educational pruposes, file form 1023 to have the IRS
determine this organization meets the rules of Section
501(c)(3), have the grant go to this foundation, and become
an employee of the foundation.

The salary received from the foundation is taxable income,
while the money spent on all other research related items is
not.

If the goal of the research is to make money for you -- to
make a profit of your research business, you could become a
sole proprietorship. Your income is reported on schedule C
as income, and your reearch expenses are then deducted, and
the profit is subject to both income tax and self employment
tax. Similar to the above with less paperwork.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Are there any publications specifically giving tax advice
for independent scholars supported by research grants?

I am an academic. I have received many research grants in
the past, but, until now, I have always been employed by an
academic institution that actually received payment of the
grant. They took care of the paperwork, and paid my regular
salary and research expenses from the grants, after
deducting taxes and social security, etc.

For the year 2005, however, I will not be employed by any
institution. I will support myself as an independent scholar
by a foundation research grant. In January, the foundation
will send me one big check for the coming year. Some of it
will go for my research expenses, but most of it will be for
my personal salary.

Are their any publications that can advise me on ways to
minimize my taxes?

How can I structure my "business" as an independent scholar,
etc. to maximize deductions? I don't even know how I'm
supposed to pay my SS taxes.

Thanks,

revheck

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