IRS Form 9368 Guide: Scholarship & Fellowship Audit Rules

Introduction – What Is Form 9368?

IRS Form 9368, titled Questionnaire – Scholarship or Fellowship Grant, is an official examination and compliance document administered by the Internal Revenue Service (IRS) and the U.S. Department of the Treasury. It is cataloged under IRS Catalog Number 13346B.

Unlike standard tax forms that you complete and submit with your annual tax return, Form 9368 is an audit questionnaire sent directly to a taxpayer by an IRS examiner. The IRS issues this form to investigate, substantiate, and verify whether scholarship, fellowship, or academic stipend income excluded from your tax return was genuinely tax-free under Internal Revenue Code (IRC) Section 117, or whether it was actually taxable compensation for services.

Purpose of the Form – Why Does Form 9368 Exist?

Under IRC Section 117, scholarships and fellowships are only tax-free if you are a degree candidate and use the funds exclusively for “qualified tuition and related expenses,” such as tuition, enrollment fees, and course-required books and supplies. Any portion of an award used for room, board, travel, or general living stipends is fully taxable.

Furthermore, Section 117(c) contains a strict rule: any amount that represents payment for teaching, research, patient care, or other services required as a condition of receiving the grant is classified as taxable compensation, even if the university labels it a “fellowship” or “stipend.” Form 9368 provides examiners with a standardized 14-question audit tool to investigate the terms of your award, evaluate your daily work duties, inspect employee fringe benefits, and determine whether your grant was a tax-free study award or taxable employment pay.

Who Needs to File This Form?

You only need to complete Form 9368 if the IRS **specifically mails it to you** (or your authorized tax professional) in connection with an examination of your federal income tax return. Common recipients include:

• Graduate Students and Postdoctoral Fellows: Individuals who excluded academic fellowships, research stipends, or training grants from gross income on Form 1040.
• Teaching and Research Assistants: Students who received tuition remissions or stipends while performing teaching, grading, or laboratory research duties for an academic department.
• Medical Residents and Clinical Fellows: Doctors, nurses, or medical trainees who claimed that clinical hospital stipends were tax-free educational fellowships.
• Employees on Sabbatical: Workers who received educational funding, grants, or continued salary from their regular employer while pursuing advanced studies.
• International Students and Scholars: Nonresident aliens who claimed scholarship exemptions under domestic tax laws or international tax treaties.

Who Is Exempt / Not Required to File?

Most college students and scholarship recipients will never encounter Form 9368. You are exempt or not required to submit this form under the following circumstances:

• No IRS Audit Notice: If you did not receive Form 9368 in the mail from an IRS examiner, you do not file it. It is not an attachment for routine annual tax returns.
• Tuition-Only Scholarships: Students whose scholarships were applied directly to mandatory tuition and fees billed on Form 1098-T with no surplus living stipends received.
• Fully Reported Stipends: Taxpayers who reported their non-tuition stipends or research assistant pay as taxable income on their original tax returns.
• Accepted Tax Returns: Students and researchers whose tax returns were processed and accepted by the IRS without an audit inquiry.

When to File Form 9368

Form 9368 does not follow standard annual tax deadlines like April 15. It is an event-driven compliance document triggered by an active IRS examination.

The response deadline is set by the examining agent and will be clearly stated in the cover letter accompanying the questionnaire—typically 30 calendar days from the date of the notice. Failing to respond by this deadline can result in the IRS automatically disallowing your tax-free exclusion, reclassifying your entire scholarship or fellowship as taxable wages, and assessing back taxes, penalties, and interest.

Where and How to File

Form 9368 cannot be submitted through commercial consumer tax software or standard electronic filing portals. It must be returned directly to the specific IRS examination unit handling your audit.

Look at the top of the form or the accompanying IRS cover letter for the section labeled “In reply refer to:”. Complete the form, attach all requested grant award letters, student billing statements, and original grant applications, and transmit the package via secure fax or certified mail with delivery tracking to the designated IRS address as per instructions on your examination notice. Always retain a complete copy of the signed questionnaire and shipping receipts in your permanent tax files.

Step-by-Step Instructions to Fill Form 9368

Form 9368 consists of an administrative header followed by 14 numbered questions probing your academic status, financial allocations, and daily work obligations. Important: Do not leave any questions blank; enter “N/A” if a question does not apply so the auditor knows it was considered.

Header Information

Enter your full legal name, current mailing address, the tax year under examination, your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), and your principal place of employment or academic study. Ensure the “In reply refer to:” code matches the reference code on your IRS audit notice.

Question-by-Question Breakdown

Question Number	Form Focus	Filing Directions
Questions 1–2	Grantor & Award Period	State the full legal name and address of the grantor organization, the award period covered, and the total dollar amount received during the tax year.
Questions 3a–3c	Expense Itemization	Itemize how the grant funds were spent: exact dollars used for tuition and mandatory course fees (3a), course-required books and supplies (3b), and amounts used for room, board, travel, and personal living expenses (3c).
Questions 4–7	Academic Degree Status	State whether you were a candidate for a degree, the degree sought, the educational institution attended, academic course requirements, and the basis upon which the grant was awarded (e.g., academic merit, financial need, research proposal).
Question 8 (8a–8d)	Duties and Services	Detail all duties performed as a condition of the award: time spent teaching classes, lecturing, grading papers, conducting lab research, or examining patients. Disclose whether non-grant recipients were required to perform identical duties.
Question 9	Employee Fringe Benefits	State whether you received employment-style benefits, such as paid sick leave, paid vacation, health or life insurance, or retirement plan contributions.
Questions 10–11	Supervision & Work Ownership	Describe who supervised your daily activities and whether the research or work produced direct operational, commercial, or patent benefits for the university or grantor.
Questions 12a–12b	Past or Future Work Commitments	Disclose whether you were employed by the grantor prior to receiving the award, or if you are obligated to perform future employment services for the grantor as a condition of receiving the grant.
Questions 13–14	Mandatory Exhibits	Attach a complete copy of your official grant or fellowship award letter (Question 13) and a copy of your original grant application (Question 14).

At the bottom of the form, you must sign and date the declaration under penalties of perjury, certifying that all statements and attached exhibits are true, correct, and complete.

Required Documents and Information Needed Before Filling

To substantiate your answers and satisfy IRS audit standards, assemble the following records before completing Form 9368:

• Official Award Letter: The formal written letter from the granting foundation, university, or government agency detailing the terms, purpose, and financial breakdown of your grant.
• Original Grant Application: A copy of the application, research proposal, or fellowship submission you filed to obtain the award.
• Form 1098-T & University Fee Statements: Official university bursar ledgers showing tuition billed, mandatory enrollment fees, and scholarship disbursements.
• Receipts for Required Course Supplies: Invoices and receipts for course-mandated textbooks, laboratory equipment, or software required for your classes.
• Forms W-2 and 1042-S: Tax reporting forms issued by the institution to verify whether any portion was classified as taxable wages by the payroll office.

Common Mistakes to Avoid

Scholarship audits frequently fail due to avoidable reporting errors. Watch out for these common mistakes:

• Leaving Questions Blank: Submitting the questionnaire with blank spaces. The IRS expects every line to have an answer; write “N/A” if a question does not apply to your situation.
• Underreporting Required Duties on Question 8: Downplaying time spent teaching, grading papers, or caring for hospital patients. If duties were required to receive payment, IRS examiners and courts treat the stipend as taxable compensation.
• Claiming Room and Board as Tax-Free: Attempting to exclude stipends used for rent, dorms, or meal plans. Under Section 117, living expenses are strictly taxable, even for full-time degree candidates.
• Omitting Mandatory Attachments: Returning Form 9368 without attaching the award letter and grant application required by Questions 13 and 14. An incomplete response delays processing and can trigger automatic deduction disallowances.
• Filing Unprompted: Submitting Form 9368 with your routine Form 1040. Form 9368 is strictly an examination questionnaire and should only be submitted when requested by the IRS.

Penalties for Non-Filing or Errors

Failing to respond to Form 9368 or submitting inaccurate information carries severe financial penalties:

• Complete Disallowance of the Scholarship Exclusion: If you ignore Form 9368, the IRS will disallow your Section 117 exclusion, reclassifying the entire scholarship or stipend as fully taxable income.
• Substantial Tax Deficiencies: Reclassifying a fellowship as taxable income often creates thousands of dollars in back taxes, complete with compounding daily interest under Section 6601.
• Accuracy-Related Penalties (IRC Section 6662): Underpaying income tax by claiming unverified or improper scholarship exclusions triggers a mandatory 20 percent penalty on the underpaid amount.
• Failure-to-Pay Penalties: Late payment of resulting tax balances triggers penalties under Section 6651 (0.5 percent per month, up to 25 percent).
• Perjury Prosecution: Intentionally falsifying grant terms or concealing work requirements on Form 9368 signed under penalties of perjury constitutes a federal crime.

Related Forms and Schedules

Form 9368 operates within a specialized group of education tax documents and audit questionnaires:

• Form 1040 / Form 1040-NR: Line 1a / Schedule 1 (where taxable scholarships and fellowship grants are reported).
• Form 1098-T: Tuition Statement (issued by colleges and universities to report qualified tuition and scholarships).
• Form 1042-S: Foreign Person’s U.S. Source Income Subject to Withholding.
• Form 9250: Questionnaire – Tax Treaty Benefits (often used alongside Form 9368 for international students).
• Form 4564: Information Document Request (the official cover notice used by examiners to request records).

Frequently Asked Questions

Why did the IRS send me Form 9368?

The IRS sends Form 9368 when an examiner audits your tax return and needs verifiable proof that the scholarship or fellowship income you excluded from gross income legally complied with the strict non-service rules of IRC Section 117.

Are graduate teaching assistant (TA) or research assistant (RA) stipends tax-free?

Generally, no. Under Section 117(c), if you are required to perform teaching, grading, or research services as a condition of receiving payment, the stipend is treated as taxable compensation for services, even if the research satisfies degree requirements.

Can scholarship money be used for off-campus rent or groceries tax-free?

No. Under federal tax law, qualified expenses are strictly limited to tuition, mandatory enrollment fees, and required course books, supplies, and equipment. Any portion of an award used for room, board, utilities, or groceries is taxable income.

What features make a grant look like taxable employment to the IRS?

On Form 9368, receiving employment fringe benefits (Question 9), performing clinical or teaching services (Question 8), working regular supervised hours (Question 10), and having past or future employment commitments to the grantor (Question 12) all indicate taxable employment compensation.

Do medical residency stipends qualify for the scholarship exclusion?

No. U.S. courts have consistently established that stipends paid to medical residents and clinical fellows are taxable compensation for patient care services, not tax-free educational fellowships.

What if I cannot locate a copy of my original grant application?

Contact your academic department, university financial aid office, or the granting organization to request an archival copy. If an official copy is unobtainable, state this clearly in an explanatory attachment and provide all surrounding award correspondence.

Conclusion – Key Takeaways Summarized

IRS Form 9368 is a vital investigative questionnaire used by IRS examiners to scrutinize and verify scholarship and fellowship exclusions under IRC Section 117. It ensures that only true educational awards—free from employment service requirements and restricted to qualified tuition expenses—are excluded from federal taxation.

If you receive Form 9368, respond before your 30-day deadline, answer all 14 questions thoroughly without leaving blanks, attach your official award letter and grant application, distinguish between tuition and living expenses, and mail or fax the complete package directly to your assigned IRS examination office.