But ironically, the students who do have tax liability are the ones who are most in need of financial assistance.
For the school year 1991-92, tuition, services and books--all non-taxable expenses--cost roughly $17,000. Therefore, only students receiving more than $17,000 in aid were liable for taxes.
While they willingly furnish details about the tax law, IRS officials refuse to comment on any part of their action at Harvard.
"We're not investigating," said Robert Ruttenberg, spokesperson for the Boston IRS office. "It's just another compliance check."
But for students on financial aid, the IRS action comes at a difficult time. University officials say that the recession has left need-based financial aid systems all over the country reeling.
In addition, some incoming students say they are confused by the widely disparaging aid offers they have received as a result of the breakup of the Overlap Group, a consortium of colleges which until recently jointly determined aid awards.
In light of these other changes, Harvard administrators say the tax crackdown could further complicate a financial aid process that has already left many students mystified.
"I'm not sure what motivated it," says James Miller, director of financial aid. "My sense from the student population is that it's very confusing."
One reason many students have trouble understanding their tax obligations is a set of federal laws that the IRS has done little to publicize within college communities.
Students, like most taxpayers, are required to pay taxes on income they earn above certain limits. Those limits are determined by how the students are listed on their parents' tax forms.
If students are not claimed as dependents on their parents' forms, they must pay taxes if they earn more than $5500. For students listed as dependents, that limit is $3400.
College grants or outside scholarships applied to anything other than tuition, fees or books, are considered to be personal, taxable income.
Financial aid, IRS officials says, is recorded on a personal income tax form under "salaries, wages and tips" and is taxed like income form any job.
But many students on financial aid say they do not understand these tax rules. And for some, their confusion keeps them from paying the taxes that they owe.
"I don't know," says Raj Yerasi '95, who receives about $20,000 in financial aid. "I don't think I'm paying them."
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