1099-NEC for Student Loan Repayment Program - Texas

[subiedude1212]

Received a 1099-NEC from the Texas Higher Education Coordinating Board as part of the Teach for Texas Loan Repayment Assistance Program. This is a 3rd party and I am not employed by them. When I attempt to add the 1099-NEC, none of the options presented seem to apply. It doesn't seem like it would be considered Self employment income, Farm income, Hobby, Lawsuit settlement, Medicaid waiver payments that qualify as difficulty of care, or Income that should've been reported on a W-2. 

How should I report this accurately and make sure I don't incur any additional unneeded tax consequences? 

[MaryK4]

The best way to report this is as Miscellaneous Income.  Follow these steps:

In the Federal under Wages & Income

1. Under Less Common Income select Start for Miscellaneous Income, 1099-A, 1099-C 
2. On the Let's Work on Any Miscellaneous Income page, select Start to the right of Other reportable income
3. On the Any Other Taxable Income? screen, select the Add button.
4. On the Other Taxable Income screen enter the description and amount.  (I would enter 1099-NEC Texas Higher Education Coordinating Board or similar so it it clearly identified.)  and Continue.

[Hal_Al]

Apparently last year's way of handling a 1099-NEC, as sporadic income, is no longer available.   

Since this is essentially additional compensation, paying social security and Medicare tax appears appropriate. "Self Employment Tax (SET) is how the self employed pay their  social security and Medicare tax.

[user17706780870]

I received this as well. All info I've read the 1099 should be a 1099-C, as it's a direct payment to a student loan servicer for debt forgiveness/repayment. Definitely not a 1099-NEC because that implies I had a working relationship with the Higher Ed board (We didn't).

I'm currently calling the IRS and will update if I get any other info on how to report it. Also sent multiple emails to individual Texas Higher Ed departments on the matter.

[subiedude1212]

Thank you! I've also reached out to THECB also but not yet the IRS. Please let me know if you figure anything out. 

[user17706780870]

Yeah, the THECB basically just told me to kick rocks and they're not wrong, even though I could simply articulate why a 1099-NEC doesn't apply.

Very difficult to get through to the IRS this time of year, especially for general questions. The issue with 1099-NEC, is as teachers - not only would we now have to file as self-employed, pay fed taxes on the forgiven amount, but also pay self-employment tax on the forgiven amount (about 15% tax). So, we're talking easily 40-50% tax on the forgiven amount.