College Summer Internship Grant 1099-MISC

[alex-bauer]

My son is a dependent college student on my return. He has a 649.00 W-2 for work last summer as well as his college gave him a grant for a summer internship for unpaid non-profit work. The grant was for $2000.00 and he received a 1099-Misc for it. I assume that both are considered "earned income". His total earned for 2021 was $2,649.00, but he only had like $12.00 taken out of his W-2 job.  He is filing his own return and it shows he owes $271 federal?  This does not make sense that someone that made only $2,649 in 2021 would pay ANY taxes?? Did I miss an input in Turbo Tax somewhere? Turbo Tax is treating the 1099-MISC as a business for him....

[MinhT1]

The tax owed is self-employment tax on the $2,000 grant. It is not income tax.

Generally, income reported on a 1099-MISC is considered by TurboTax as self-employed income subject to self-employment tax.

In your case, a grant for internship is not considered self-emplyment as there is no intent to make a profit.

In TurboTax, enter your form 1099-MISC and follow the interview until you arrive at the page titled Did this involve an intent to earn money?. Answer that this did not involve an intent to earn money. The amount will be reported as Miscellaneous income and will not be subject to Self-employment tax.

In TurboTax, there is a work-around. Although you may receive this income every year, say that you only receive the 1099-MISC only in 2021, not in previous years and not in 2022, you will then have the screen where you can say that it did not involve an intent to earn money.

[Hal_Al]

MinhT1's answer is the correct way to enter it, in TurboTax, to keep it from being considered as self employment  and subject to the ~14% self employment (social security and medicare) tax.

Unfortunately it is not considered earned income, when reported that way.  Since the amount is less than $2200 (the "kiddie tax" threshold) it should not be a problem.