Research stipend plus Room and Board grant - how to account for on student's tax return?

[brommabo]

Our son, who we claim as a dependent, received a 1099MISC form from his college for a $6100 stipend for  summer research he did. And on his 1098-T the college added $3500 in Box 5(scholarship or grants) that they provided from a scholarship fund(trust)for room and board for him during the summer.  During the school year he earned about $1300 for tutoring for which he received a W-2.  I am confused how he should declare these amounts on his tax return.

[JillS56]

Since you have the scholarship that covers your tuition from Form 1098-T, you will report your stipend amount under Other Reportable Income.  Here are the steps:

In TurboTax online edition, 

• After signing into your account, select Pick up where you left off
• To your left, select Federal 
• Scroll down to  Less Common Income / Miscellaneous Income 1099-A, 1099-C, select Start
• Next screen, scroll all the way down to Other Reportable Income, select Start to enter information
• The next screen will allow you to report the income with a brief explanation.
• Here I would enter research stipend income and the amount.

How to Enter My Stipend Income.

[Hal_Al · Accepted solution]

Technically, he doesn't need to file a tax return as 6100 +3500 + 1300 = less than the $12,550 filing requirement.

Unfortunately, income on a 1099-Misc may be red flagged by the IRS as unearned income, which means a lower filing threshold and smaller standard deduction (and actual tax).   You could just not file and hope to explain it if you hear from the IRS.  Filing may head off an IRS inquiry.   But, there's still some risk, as the correct way to file does not put the income on the line,  where the IRS expects a 1099-Misc to be reported. 

The college should not have used a 1099-Misc. They shoulda added the stipend to box 5 of the 1098-T or used a W-2. That said, it's still common practice, and is handled as follows:

In TurboTax, do not enter at the 1099-Misc place. Instead, after entering the 1098-T, in the education interview, you will eventually reach a screen asking if he had any additional scholarships. It's there that you enter the $6100.   That puts it on line 1 of form 1040 with the notation SCH to the left.

[brommabo]

Thank,  but the scholarship for $3500 does not cover tuition, it covered room and board for the summer. The rest of the 1098-T has his qualified tuition expenses in Box 1 and his scholarship for the school year tuition in Box 5. The school added the $3500 for summer room and board(while he was doing the research) on top of the Box 5 amount if that makes sense. The $6100 1099MISC is for the research stipend. I should not enter that amount  in the 1099-MISC field?

[Hal_Al]

Q. But the scholarship for $3500 does not cover tuition, it covered room and board for the summer.

A.  The interview will ask how much of the scholarship was used for room and board.  But, since the school classifies it as "scholarship", you are allowed to apply it to tuition, if you want to, to keep it from being taxable (not needed in your case).  Be sure to "save" enough tuition to claim the tuition credit.

Q.  The school added the $3500 for summer room and board(while he was doing the research) on top of the Box 5 amount if that makes sense. 

A. Yes. That's common.  All scholarship goes in box 5, not just the scholarship for tuition.

Q. The $6100 1099MISC is for the research stipend. I should not enter that amount  in the 1099-MISC field?

A. Correct. Stipend income is earned income and you want it reported as such.   TurboTax will enter a 1099-Misc as unearned income.  

[brommabo]

Yes, I figured and worried about potential red flagging...And then the $3500 goes there too, since I entered it as going to room and board in the Education section out of the total of the amount in Box 5. That appears as SCH income.

Related question, on my husband's and my return we filled out the Education section to get the Amer Opportunity credit by deducting the $3500 from Box 5 in our return. Is that reasonable?

[brommabo]

When I changed my son's return to entering the $6100 stipend as scholarship in the Education section, his tax liability went to 0. However, his income shows as 8998 and deductions as 9332. Can he still do an Roth IRA for 2021 even though his tax liability is 0?

[JillS56]

The Roth IRA is not a tax deductible contribution.  The rule on whether or not you can contribute to either a Traditional IRA or a Roth IRA does not have to do with a tax liability but whether or not there is earned income.  What is his AGI?   What are the deductions?  If he shows earned income then he can contribute.

[Hal_Al]

Q. Related question, on my husband's and my return we filled out the Education section to get the Amer Opportunity credit (AOTC) by deducting the $3500 from Box 5 in our return. Is that reasonable?

A.  Yes.  Deduct another $500, if needed to get you the full $4000 for the maximum AOTC. Just be sure he reports the additional $500 as income on his return. 

Q. When I changed my son's return to entering the $6100 stipend as scholarship in the Education section, his tax liability went to 0. However, his income shows as 8998 and deductions as 9332. Can he still do an Roth IRA for 2021 even though his tax liability is 0?

A. Yes.  As JillS56 said, you don't need taxable income, just enough earned income ($6000 for the maximum Roth contribution) in your gross (total) income and you have that. 

[brommabo]

Thanks so much!

[brommabo]

Finally, on our joint return, we did deduct the $3500 for room and board from the 1098-T Box 5 but I am still unclear how we enter the $6100 stipend on our Education interview. If we enter it as other scholarship, we have to say it is not allocable to 2021 expenses or we do not get the American Opportunity Education credit.

[LeonardS]

To report a Grant or Stipend in TurboTax follow these steps:

1. Log in to your TurboTax account if it is not open.
2. Select the Wages & Income tab.
3. Scroll down to Less common income click Show more.
4. On the page Let's Work on Any Miscellaneous Income click on Other reportable income.
5. On the page Any Other Taxable Income?  select yes.
6. On the page, Other Taxable Income enter Stipend for the description and the amount.
7. Select continue and answer No on the next page.

[brommabo]

The income from the  stipend $6100 and the room and board grant fro $3500 appears on my son's return as scholarship income but he does not get the American opportunity credit since he is a dependent of ours. My question is how we show it on our return to get the American Opportunity credit....

[AmyC]

You will put the 1098-T on your return to claim the credit. Your student gets the taxable income. I  recommend you look at another of my answers for help.