Stipend taxability?

Am confused. Did you reject the $15,000 and in return get to work in rural areas?

Anyway, medical students are not always exempt from FICA:

BEGIN QUOTE : UNITED STATES OF AMERICA versus MOUNT SINAI MEDICAL CENTER OF FLORIDA, INC.

The issue presented in this case is a question of first impression for this Circuit: are medical residents eligible to assert the ?student exemption? from Federal Insurance Contributions Act (?FICA?) taxation found in 26 U.S.C. § 3121(b)(10)? We hold that the services performed by medical residents are not categorically ineligible for the student exemption from FICA taxation. As a result, we VACATE the summary judgment and REMAND for further proceedings consistent with this opinion.

END QUOTE

Read more at

0663,00.html They talk about the nature of the work, etc. I'm suspecting that you must pay FICA tax, but am not 100% sure.

First, I am going to have to make some assumptions.

1. I assume you are referring to the NM Health Service Corps commitment stipend. I.e., you contracted to perform services for a period of 24 months in a high-need "Health Professional Shortage Area". You are free to spend the money as you please.
2. As you are referring to an IRS bill, you are discussing a prior year tax return, hopefully one in which you declared the payment as taxable. (Note, it is taxable.)
3. You probably entered the taxable amount on Line 21, Other Income of the 1040.
4. The IRS audit said the payment is self-employment income because they have a copy of the 1099-MISC that you received from the NM Department of Health with ,000 entered in Box 7, Nonemployee Compensation. (Did you actually receive a 1099-MISC with the ,000 in Box 7?)

I have not personally seen a client that has received these stipends. The question on the table is whether the payment should be treated as self-employment income or "Other Income". Payments for future services are treated the same as payments for current services. They are taxable compensation. E.g., a hiring bonus for an employee is taxable as wages and would show up on that employees W-2. It seems to me that what you received is a payment for your commitment to provide future services and it would be subject to self-employment tax.

All that being said have you tried contacting Phoebe Yazzie, the person who manages the program for the New Mexico Dept. of Health? She may be able to shed some light. Phoebe Yazzie: (505) 841-5872, snipped-for-privacy@state.nm.us

Don't they always say please refer to your tax adviser for tax issues?

Yes but sometimes they also provide the answer with the caveat. The folks who run Americorps knew what to do.