Scholarships should not be reported on a 1099-Misc. TurboTax aggressively steers you to self employment, because so many 1099-misc are really that.
1099-Misc income (I assume the $ are box 3) is usually reported on line 8z of Schedule 1, as "other income". It is treated as unearned income.
Enter at the 1099-Misc screen
On the next screen Describe what the payment was for
On the next screen select "none of these apply"
On the next screen select "No it didn't involve work like my main job"
On the next screen select "I got it in 2020" ONLY
On the next screen select No, it didn't involve intent to earn money
TT will put the amount on line 8z of Schedule 1 as other income
If you can be claimed as somebody's dependent; you (and the IRS) want scholarship income reported on line 1 of form 1040 with the notation SCH (starting in 2022, on line 8r of Schedule 1) so it will be treated as earned income for the purposes of calculating the dependent's standard deduction (earned income + $350, but not more than $12,400).
Instead of entering as other income, at the 1099-Misc screen, In TurboTax (TT), enter at:
Federal Taxes Tab (Personal for H&B version)
Deductions & Credits
-Scroll down to:
--Education
--Education Expenses
After entering your 1098-T (if you don't have a 1098-T, answer that you qualify for an exception). That will eventually get you to a screen to enter scholarships not shown on a 1098-T. When asked how much of the scholarship was used for room and board, enter the entire amount of the 1099-Misc. That will make it taxable.
This next steps are optional (and in addition to entering it as scholarship). There's a small chance the IRS computers will not match the 1099-misc to the Scholarship income. If you want to try to ward that off, do this:
Enter the 1099-Misc income as described above, Reporting the income as misc line 8z, Schedule 1 income (enter in TurboTax at the 1099-Misc screen) . Then enter a line 8z deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front. Briefly explain at description (1099-misc reported as Scholarship income)
