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>has anyone out there who signed a public health service payback agreement
>for their mstp stipend been able to get a tax refund for the years they
>signed the agreement?
>
>
>---
>
>Seth L. Ness                         Ness Gadol Hayah Sham
>ness@aecom.yu.edu
>S++ K++ Fa1 M++ H++ T+ t SY+++M/A AT+++ Te++/Te+++ SC++ FO+++
>D+++ P+ Tz+ E


Yes, I signed a PHS payback agreement and dutifully paid taxes on my
stipend.  Then I realized that the MSTP stipend *if granted before 1993*
could be considered a loan, since it was subject to a payback agreement.
Therefore, it should not be taxable.  I argued my case with the IRS (by
filling out a 1099 form), and got full tax refunds for the 3 years prior
(there is a 3-year limit in how much you can get from back taxes).

However, there is a catch.  If you consider your MSTP stipend a loan so you
can save on taxes now, then you have to report it as loan-forgiveness
income when your payback agreement is fulfilled, i.e. for every year you
pay back you should report as earnings the amount of stipend you are
forgiven.  That will place you in a higher tax bracket.  Therefore, the
issue is not whether you can exempt yourself from taxes, but rather whether
you want to pay taxes on your stipend now or later.  Later you will have a
higher income, but also a higher tax rate.

A final note of clarification: yes, you can use your Ph.D. years as part of
your payback period, but only if you are not supported by NIH: if you were
awarded a predoctoral NRSA or you were included in an NIH training grant
*before 1993* during your graduate work, the years you owe add up rather
than cancel out.

I hope this is helpful.

Jose
--------------
Jose C. Florez
MD/PhD Program (Neuroscience)
Northwestern University
Phone: (708) 491-4198
Fax: (708) 491-5211