stipend reporting 1099-MISC

[TARibs07]

I've seen this post a number of times as the response for reporting a stipend but it doesn't make sense.  I tried reporting it as a Minus but that still brought it up as a personal business.  I also can't follow the end as another person posted (but got no response) as I also already have a 1098-T so don't understand how it can be reported there?

The fact that you have 1099-Misc slightly complicates the matters. There will be a few steps to follow to report your stipend correctly because of the form 1099-MISC.   First, you would have to report 1099-MISC and make adjustments for the IRS matching purposes. Then you would report the stipend correctly using steps below.   

REPORT 1099-MISC

IF box 3 reports your stipend, report the form:

To enter/edit a 1099-MISC form:

• Open (continue) your return if it's not already open.
• In the Search box (top right-hand corner), type “1099-misc’
• Click on the Magnifying Glass icon.
• Click on “Jump to 1099-misc” link high-lighted in Blue.
• Answer the Step-by-step instructions.

and make adjustment using the steps below:

1. Federal taxes
2. Wages and Income
3. Scroll down to Less Common Income
4. Select Miscellaneous Income.
5. Select “Other reportable income”, click ‘Yes’ and you will be prompted to enter Description and amount. Please be sure to write a short explanation and enter the amount as a negative number.   At this point, the form 1040 will show full amount as taxable AND as a negative adjustment on line 21. The end result: form is reported but not taxable.

 If box 7 reports the stipend, you would have to report it as self-employed income, then enter the same amount as your "business" expense.  This will ensure that form 1099-MISC is reported for matching purposes, but the amount is not taxable as self-employment income.

1.        Federal Taxes

2.        Wages and Income

3.        Self-Employment , Select Income and Expenses - follow the interview questions; you would report the stipend as if you own a business; once general questions are answered, you would enter the stipend as an expense (you can create your own description). The end result: form 199-MISC is reported, but the income is not self-employment income, because it shouldn’t be.

REPORT STIPEND INCOME CORRECTLY

To report stipend income in Turbo Tax, you must visit Deductions and Credits, Education Expenses section. You must answer all the questions, the taxable amount will be computed as the excess of your scholarship over the qualified education expenses.

1. Federal Taxes
2. Deduction & Credits  
3. Scroll down to Education
4. Select Expenses and Scholarships
5. Follow the prompts… It will be somewhat confusing as you are answering the questions as if you claim an education credit… answer the initial questions and select that you did not receive form 1098-T. You will be asked for school’s name and address, just fill out the program information you are in... You will eventually see a screen "Did (your name) receive a scholarship or grant in 2016? Please enter your stipend in other Scholarships/Grants/Fellowships; this will ensure that the stipend is taxable on line 7 form 1040 as wages.

Once done, you may review your form 1040 and to verify that line 7 of the form looks correct.  You may do so prior to paying for the program:

1. From My Account drop down, select Tools (you must be logged into your tax return)
2. Select View Tax Summary
3. Select Preview my 1040 

[Hal_Al · Accepted solution]

Q. I also already have a 1098-T so don't understand how it can be reported there?

A. It can be reported there because it is scholarship (stipend) that is in addition to the scholarship (if any) already reported on the 1098-T.  More importantly, it's the only way to report the income so that it is classified as taxable scholarship (on line 8r of Schedule 1).

Instead of entering as other income, at the 1099-Misc screen,  In TurboTax (TT), enter at:

Federal Taxes Tab (Personal for H&B version)

Deductions & Credits

-Scroll down to:

--Education

  --Education Expenses

After entering your 1098-T (if you don't have a 1098-T, answer that you qualify for an exception). That will eventually get you to a screen to enter scholarships not shown on a 1098-T.  When asked if the scholarship was used for room and board, answer yes, and enter the entire amount of the 1099-Misc.  That will make it taxable.

This next steps are optional (and in addition to entering it as scholarship).  There's a small chance the IRS  computers will not match the 1099-misc to the Scholarship income.  If you want to try to ward that off, do this:

Enter 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 2022" ONLY

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

TT will put the amount on line 8z  of Schedule 1 as other income

Then enter a line 8z deduction, for the same amount.  In TurboTax (TT), enter 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 (1099-misc reported as Scholarship income)

[TARibs07]

Thank you this seems to have worked.  My only remaining question is why am I then subtracting it (entering it with a minus sign) , what is the rationale?  Does this mean it is taxed but not in the. same way as income?  Just want to make sure I'm not doing something that isn't allowed?

Tom

[Hal_Al]

The IRS  computers are not looking for 1099-MISC income on line 8r  of Schedule 1.  They are expecting it on line 8z.  So, you want to put something on line 8z to match the 1099-MISC in the IRS system. But you don't want to be taxed on it twice.  So, you enter it twice on line 8z (with the magic words "1099-MISC").  The same number, plus and minus, ends up reporting $0 on line 8z.  It gets taxed, because it's on line 8r. 

Q. Does this mean it is taxed but not in the. same way as "other" income? 

A. Yes.  "Other income" is taxed as unearned income. For most people that may not matter. But for student-dependents, it can make a difference in the amount of tax paid.

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  For grad students and post grad fellows, scholarship income is earned income ( "compensation") for IRA contributions.