Q. TurboTax requested I file a SS-8 with IRS. Is that necessary?
A. No. That is just one way of doing it.
Since the income was reported on a 1099-NEC, the usual way to report a 1099-NEC is as self employment income on Schedule C.
However, what you describe is a stipend. Stipends are usually reported as scholarship income.
If you 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. When asked if any was used for room and board (R&B), answer yes. Then enter the amount you want to be taxable (usually all of the 1099 amount), 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 the income on line 8r of Schedule 1* (this line was added in 2022).
Q. Will the IRS question that the 1099-NEC is not reported?
A. Possibly. But you should be able to explain it away.
There is a way to possibly head off an IRS inquiry and is sometimes recommended, in this forum. After reporting the income as stipend (line 8r, Sch 1), also report the 1099-NEC as misc line 8z, Schedule 1 income (enter in TurboTax at the 1099-NEC screen and identify it as sporadic income ["did not involve intent to earn money"]). Then enter a line 8z deduction, for the same amount. In TurboTax (TT), enter the deduction 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 "stipend erroneous reported on1099-NEC". $0 will go on line 8z, but the explanation will appear.
