This sounds like earned income, like a graduate research assistantship, since the student is expected to work on the professor's research project. Turbotax thinks that this is unearned income and taxes it at the parents' tax rate (kiddie tax), similar to dividends and interest. Does that sound right? The fellowship was only in place for part of the year and may or may not have provided more than 50% of the student's living expenses.
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Unfortunately, money from the NSF GRFP (or any other graduate fellowship) does not count as earned income. As a graduate student, the only money that counts as earned income is from Teaching Assistantships or Research Assistantships where they provide you with a W-2 form (which is completely ridiculous in my opinion...). Perhaps you could ask the university if they could give you a W-2 form for the fellowship money; I doubt they'd do that, as I tried myself.
In Turbotax, you would want to search for "1098-T", which will lead you to a page where you enter your Higher Education Expenses. When you enter your information from the 1098-T exactly as shown, they will apply tax at the normal rate on the fellowship portion that was used for living expenses (not tuition).
Sorry if that doesn't completely answer your question! Perhaps someone else could add to this.
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