Due to recent changes in the State of Iowa's tax rules, many graduate assistants (GAs) will benefit from adjusting their Iowa Form W-4 in Workday. The suggestion described below will help GAs who are (a) nonresidents for U.S. tax purposes and (b) receive more than $9,000 in stipend during 2024. Acting on this suggestion will result in the appropriate amount of Iowa tax being withdrawn from stipend deposits during the remainder of 2024.
If you wish to pursue this suggestion, please:
- Determine if you are a nonresident for U.S. tax purposes in 2024. Generally, you are a nonresident for 2024 U.S. tax purposes if you arrived in the U.S. in F or J student status in 2020 or later.
- If you are a nonresident, estimate your total ISU income from January 1, 2024, through December 31, 2024.
- Use the Stipend Amount on your current Letter(s) of Intent for this estimate plus any additional stipend or wages you expect from ISU during 2024.
- If you enrolled for 2024 tax treaty benefits with the ISSO, you may deduct the amount of your tax treaty benefit for 2024 from your 2024 earnings estimate. (Please refer to Line 12c on Page 2 of your Form 8233 for the tax treaty amount.)
- Multiply the result of your estimate in Step 2 by 3%.
- Divide the amount calculated in Step 3 by the number of stipend payments you will receive from today through December 31, 2024.
- Follow the Workday instructions provided here: https://iastate.service-now.com/esc?id=kb_article&sysparm_article=KB0020952 to enter this "Additional Amount" in your Iowa Form W-4. Be sure that on the updated Iowa W-4:
- Your “Marital Status” is set to “Other” (even if you are married)
- All other fields and boxes are “0” or empty except for the “Additional Amount” you enter. (See example below.)
Although you will pay the same amount of Iowa tax whether it is deducted in increments from each payment you receive or you pay a lump sum with your 2024 Iowa tax return in early 2025, you may find it more manageable to pay tax gradually throughout the year. Please note that your stipend payment will be reduced each pay period by the amount of additional withholding you enter on your Iowa W-4. Although adding an Additional Amount of withholding to your Iowa W-4 will more closely approximate the amount of Iowa tax you must pay for 2024, it is unlikely to hit that target exactly. You may find that you owe the State of Iowa more tax when preparing your 2024 Iowa tax return in early 2025. But making the suggested adjustments to your Iowa Form W-4 should reduce or eliminate any additional amount you might have to pay with your 2024 Iowa income tax return.
Here are some examples:
GA 1's Letter of Intent is for the period from January 15, 2024, through December 15, 2024, with a total stipend of $25,000. GA 1 anticipates no other ISU income for 2024. He calculates 3% of his total stipend as $750. GA 1’s stipend is paid twice a month, so he will receive 20 payments for the period from March through December 2024. He divides $750 by 20 and enters $38 as an Additional Amount of withholding on his Iowa W-4.
GA 2 has a Letter of Intent for January 15, 2024, through May 15, 2024, with a total stipend of $8,500. GA 2 does not plan to be on appointment over the summer but expects to renew her assistantship for Fall Semester 2024 from August 15, 2024, through December 15, 2024, with a stipend of $8,500. GA 2 calculates her total stipend income for 2024 as $17,000, multiplies that total by 3% to yield $510. From March through December 2024, she will receive 15 paychecks. She divides $510 by 15 and enters $34 as an Additional Amount of withholding on her Iowa W-4.