How to report 1099-MISC received for research stipend ? (not self-employed)

[eridani]

Hi all,

I received 1099-MISC for my research stipend (not really a salary but a fellowship paid to do research full time in 2020). I was a postdoctoral researcher (not a student).

I've tried reporting it but Turbo Tax classifies me as self-employed, and I believe I am paying too much tax on this.

How do I report it in turbotax so it's considered an academic fellowship/stipend?

My 1099-MISC form has only Box 3: Other income

Any help would be much appreciated!

Thank you very much

Eridani

[LenaH · Accepted solution]

Once you enter your 1099-MISC, it is important that you answer the questions that follow the entry screen for the 1099-MISC. If answered correctly, you will also be able to have this income flow to Other Income, rather than self-employment income. 

Please follow the instructions below:

1. Open or continue your return, if you're not already in it.
2. Search for 1099-misc and select the Jump-to link.
3. Click Edit next to your 1099-MISC.
4. Continue past the information entered. 
5. Describe the reason for this 1099-MISC.
6. Answer None of these apply on the screen Does one of these uncommon situations apply?
7. Answer No, it didn't involve work like my main job for the question Did this involve work that's like my main job?
8. Answer You got it in 2020 for the question How often did you get this income?
9. Answer No, it didn't involve an intent to earn money for the question Did this involve an intent to earn money?
10. Answer the remaining on-screen questions.
11. Your 1099-MISC will flow to Other Income.

Next, please confirm your 1099-MISC went to Other Income on your 1040.

1. Click on Tax Tools on the left hand side.
2. Click on Tools.
3. Click on View Tax Summary.
4. Click on Preview my 1040 on the left hand side.
5. Search for Schedule 1 - Additional Income & Adjustments to Income.
6. A description of your Other Income and the amount should be listed in Line 8. 

If a Schedule C was populated, please delete any Schedule C forms or associated self-employment forms in your return.

1. Search for Schedule C with the magnifying glass tool on the top of the page.
2. Select the Jump to Schedule C link in the search results.
3. Select No to the question Did you have any self-employment income or expenses? 
4. Click on Tools.
5. Click on Delete a Form. 
6. Scroll down to your forms and look for forms you need to remove and click Delete. 

[Hal_Al]

If you can be claimed as a dependent, by someone else, you will want to enter it differently, than how LenaH describes. Or if you want to make an IRA contribution based on this "compensation".

If so, reply back for alternate instructions.

[eridani]

I am filling as single. Lena's solution worked!

I am not paying the self-employment tax anymore, phew. Just the standard income tax.

Thank you SO MUCH for your help. I was a bit depressed thinking I'd have to sell my car ^^

[eridani]

One final question, Turbotax is showing that I need to pay:

Underpayment Penalties: You have a penalty of $x for underpayment of your estimated taxes. The balance due on your return includes this penalty. 

Why is that happening? 

[drjoe66]

We are in the same situation for my daughter, but I claim her as a dependent. How would we have to enter this then? Any insight is appreciated.

[Hal_Al]

@drjoe66 

You do not enter your dependent's income on your return.  If it has to be reported , it gets entered on her return.

The trouble with the above described way is that it is treated as unearned income, which limits the dependent's standard deduction to $1100.  So, you may be better off entering it as self employment. 

But if it's truly not self employment, there's third way.

Federal Taxes Tab

-Wages and income

Scroll down to:

--less common income

---Misc Income, 1099-A, 1099-C..... (Press start)

-----Select START (or update) to the 1st choice  titled "Other Income not reported on a W-2....." and Continue

-------Select YES to other wages received  and Continue

----------Select CONTINUE on the "Wages earned as a Household Employee" screen (enter nothing here)

--------------Select CONTINUE on the "Sick or Disability Pay" screen (enter nothing here)

-----------------Select "Yes" on the "Any Other Earned Income" screen and continue

----------------------Select "Other" on the "Enter Source of Other Earned Income" and Continue

--------------------------In Description Box type "Stipend" and the amount. Click Done.

That puts the income on line 1 of form 1040, where it is treated as earned income. 

Note: income on line 1 of form 1040 without a W-2 or line 1 code is a small red flag at the IRS

If she worked for a college or non profit  instead of a company, the income could be entered as taxable scholarship. Enter it in the educational expenses section, rathe than the income section of TurboTax.  This still puts it on line 1 of form 1040, but with the "SCH"code.

[CyndyC1]

Hello.

the response below is super helpful. My son has the exact senerio below. Paid by the university as a post doc researcher on a fellowship. Receives a 1099-misc and is considered non comp.  Does he have to submit FICA or self employment taxes on a form with the tax return? They only deduct state and federal income taxes from his return.

[Hal_Al]

The above description for "if it's truly not self employment, there's third way" is out of date.  It will still work, but  is no longer the best place.

  Enter scholarship. Enter stipend.  Enter at Educational Expenses and Scholarships, under Deductions and credits (not at the 1099-MISC screen in the income section).

After answering no to having a 1098-T*, answer yes to qualifying for an exception (that gets you to the entry screens). You will have to go thru the whole education interview to get to the scholarship screen. At the scholarship screen, enter the amount of the grant. When asked if any was used for room and board, answer yes. Then enter the amount you want to be taxable (usually all of it), in the pop up box. R&B are not "qualified educational  expenses".  So, this is how you tell TT that it is taxable. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.  This will put it on line 8r of Schedule 1 (this line was added in 2022).

*If you do have a 1098-T, one of the follow-up questions will be do you have any scholarships not shown on the 1098-T. Enter the additional scholarship/stipend there.  

Q.   Does he have to submit FICA or self employment taxes on a form with the tax return? 

A. Usually not. See discussion above, in the older replies.  

Q. He got a 1099-MISC with federal and state withholding in boxes 4 & 16. Does that change anything?

A. Yes, The 1098-Misc must be entered to get the withholding credited to you.  After entering the stipend, as described above, in this reply, you need it enter it two more times.  

Enter the 1099-Misc 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 2024" ONLY (even if you get/got it in other years, this is a necessary workaround for the no intent to earn money situation)

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

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. Call it something like "erroneous 1099 received"