I had a fellowship in the spring and summer last year. I believe I got about $6,000 total. I can't really remember. Anyway I found out today that fellowships and even scholarship are considered to be taxable income.

My income taxes and the FASA have already been processed. I do my own taxes so never thought and it seemed to me it would ridiculous to tax fellowship money. I have never received a 1099-MISC from the organization that gave me the fellowship.

This really worries for two reasons. First of all I really can't afford to pay any taxes. Paying $900 or $600 would break me. I know how the IRS is about paying by installments. I'll still have to pay interest. I could always say that I spent the money on tuition and books though.

Secondly, the financial aid office wants me to fill out a 'verification worksheet' for low income students. Worksheet asks for specific information about grant and scholarship aid reported to the IRS in the adjusted gross income and untaxable income. Worried that the financial aid knows that I received the fellowship but saw it wasn't on my tax return.

Are grants considered taxable income? I did receive two grants. And should I correct my income tax? My friend said that $6,000 is no big deal. That some people don't ever file their taxes.

If you are a degree candidate and if the financial aid (includes scholarship and fellowship) is for tuition fee, other fees, books, supplies and equipment, then it is not taxable. For a degree candidate aid for boarding and travel are taxable. If you are not a degree candidate, then all the financial aid is taxable.

You must use Worksheet 1-1 in Chapter 1 of Publication 970 to figure out the taxable amount. Scholarship and fellowship grants, Your U.S. Tax Return: The U.S. Income Tax Topics 1 (http://taxipay.blogspot.com/2008/08/us-income-tax-topics-1.html)