1099 MISC Income

DB31 · ‎February 23, 2020

I am retired from an employer that started sending me a monthly 'stipend' to pay for health insurance back in 2016. I've always had my taxes done by an accountant until this year. But I just notice that in 2016 and 2017 this stipend was just listed as 'other income' and no self employment tax was owed. However in 2018 my accountant had me pay self employment tax. This year Turbo Tax keeps treating that income as self employment income and wants me to pay self employment tax, which is fairly substantial. Was there a change in the law from 2017 until 2018 that caused this money to require self employment tax? I do not do any work or anything for this income. It is just a check from my former employer. Thanks for the help.

LeonardS · ‎February 24, 2020

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There have been no changes to the tax law affecting the reporting of stipends. To report your stipend as exempt from self-employment in TurboTax follow these steps:

With TurboTax open Scroll down to Less Common Income and select Miscellaneous Income, 1099-A, 1099-C
On the next page, select Other reportable income
On the page, Other Taxable Income enter stipend in the description.

 This will put the income on Schedule 1 Line 8 of your Form 1040, as required by the IRS.  You will pay state and federal income tax on the amount, but it will not be subject to self-employment tax.

You may want to amend your 2018 tax return if your stipend was subject to self-employment tax to report the stipend as exempt from self-employment tax.

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DB31 · ‎February 24, 2020

Thank you. This makes much more sense because it is NOT income from any type of work or activity. When I made the change Turbo Tax did say this should not include income reported on a 1099 misc? What do you think? Am I in compliance to go ahead and report it to show up on Schedule 1, Line 8 as you suggested? It actually increases my AGI because I lose the health insurance premium deduction, but it decreases my taxes because I'm not paying the self employment tax. Thanks again so much for your assistance!