REU Internship Stipend

[spikemarbles]

Hi!  My daughter did an REU (Research Experience for Undergraduates) Internship that was set up through her college.  They paid her a $6500 stipend for a 10 week program.  She's also my dependent for filing purposes.  Would this be considered taxable income for her?

[MinhT1]

The stipend is taxable income for your daughter. It is not subject to self-employment tax.

If this was her only income, she is not required to file a tax return as it is below the standard deduction of $12,550.

You can still claim her as your dependent if she otherwise qualifies.

[spikemarbles]

Thanks for the reply and help!  She had some other income on a W2, but together this does not meet the standard deduction.

Two additional questions:

1. She qualifies for being my dependent.  I noticed if I did a Turbotax return for her as my dependent, it says the standard deduction is different and the tax owed is quite large.

2. If I set it up as her not claimed as a dependent, it is much more acceptable.  But it sounds like we don't have to file taxes for her at all?  Just wanted to confirm that.

[JohnW152]

Since you say that your daughter qualifies to be claimed as your dependent, you have to answer “yes” on her return that she can be claimed as a dependent on your return.

But, as you say, your daughter isn’t required to file a return.

Please see the TurboTax Help article When do I have to answer “yes” to being claimed as a dependent? for additional details. 

[spikemarbles]

Thanks for the response!  So, let me make sure I understand this, as I'm kind of slow:

1. Since my daughter's combined income (job and stipend) is less than the standard deduction, even though I am claiming her as a dependent, she does not have to file a return.

2.  It sounds like the only reason to even file a return for her is to claim some small refund from her W2 withholdings. 

3. If she does file a return, then she would have to include the stipend.

4. Dumb question: just because she filed a return in 2020 doesn't mean she has to file a return in 2021?

Thanks for bearing with me on this!

[JohnW152 · Accepted solution]

You're correct on all counts.  The only real reason she might want to file is to claim her income tax withholding.  

You might want to look at Dependents on the IRS’ Topic No. 551 Standard Deduction to see what your daughter’s standard deduction might be.

[spikemarbles]

Great.  Thank you very much!!!