continuing education tuition paid by employer

[GGmomCLS65]

My son's continuing education program was paid by his current employer.  They sent him a 1099-MISC but he didn't receive the money.  It was paid directly to the college.  When I enter the 1099MISC in Turbo tax it wants to set it up as a business.  How should this be reported?

[LeonardS]

To enter your son's continuing education paid for by his employer these steps.

• With TurboTax open select  Wages & Income.
• Scroll down to Less Common Income and select Miscellaneous Income, 1099-A, 1099-C
• On the next page, select Other reportable income
• On the page, Other Taxable Income enter Employer Paid Education in the description. 

 This will put the income on Schedule 1 Line 8 of his  Form 1040, as required by the IRS.  He will pay state and federal income tax on the amount, but it will not be subject to self-employment tax.

[Hal_Al]

The above reply by LeonardS is one way to do it.

There is another way.

The IRS considers anything in box 7 of 1099-MISC to be self employment income. TurboTax (TT) aggressively steers you in that direction, even if the amount is in box 3. If you try reporting box 7 income as anything else, you chances of hearing from the IRS are high.  

 That said, the key to getting TT to treat it as other income is to follow these steps:

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 2019" ONLY

On the next screen select No, it didn't involve intent to earn money

TT will put the amount on  Schedule 1 Line 8, but identifying it as 1099-Misc income

Since you son has now effectively paid tuition with his  own after tax money, he may claim the tuition credit, even though his employer paid the college directly.