Student Internship reported on 1099 MISC

[Jakeado]

The question of how to report a stipend from a student summer internship has been addressed multiple times but I can find no clear answer. A 10 week summer internship at a national lab provided a 1099 MISC as a stipend, and while I know how to get around using the schedule C from answers provided here, reporting it as other income makes it unearned income and triggers the kiddie tax! I am looking for a legitimate way to report this as earned income (and not self employment income or a scholarship) which would seem to reflect the "spirit" of IRS guidelines, in that it really doesn't fir the definitions of self employment OR unearned income. Any assistance would be appreciated!

[Hal_Al]

Q. Looking for a legitimate way to report this as earned income (and not self employment income or a scholarship).

A. It doesn't exist. 

Academic stipends are typically reported as taxable scholarship*, depending on the setting (what does "national lab" mean).

Internship is normally wages and is subject to social security and medicare tax, either as W-2 withholding or self employment tax (and a 1099-NEC, rather than 1099-misc).

*Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $15,750 filing requirement (2025) and the dependent standard deduction calculation (earned income + $450).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

Taxable scholarship goes on line 8r of Schedule 1, from which TT treats it as hybrid income.

In TT, enter stipend/scholarship in the 1098-T interview as scholarships not shown on the 1098-T. 

[Jakeado]

Thanks. So there a paid internship program sponsored and paid for under the Department of Energy's  Office of Science’s Office of Workforce Development for Teachers and Scientists (WDTS)  which works in collaboration with DOE laboratories/facilities across the country. While you must be a college student with a 3.0 or higher GPA to be considered, I have trouble characterizing it as a scholarship/fellowship under IRS guidelines. It didn't take place at a university, nor was it directly related to the college program. Having said that, I would like to be enter it as such, and do it the way you said (not under scholarships on schedule 1, line R?) because then it would in fact not be taxed as unearned income, and the kiddie tax would not be triggered I believe. 

[Hal_Al]

 A "paid internship program sponsored and paid for under the Department of Energy's  Office of Science’s Office of Workforce Development for Teachers and Scientists (WDTS)" sounds like a "stipend".  I would enter it as scholarship (Schedule 1, Line 8r).  The first $15,570 will avoid the kiddie tax. 

Otherwise, you report it as self employment subject to 15.3% self employment tax*. You enter at the 1099-Misc section and answer that your intent was to earn money. 

*Effectively 14.13%, instead of the stated rate of 15.3%, after the convoluted calculation.

[Jakeado]

Thank you again. Yes, while I do not think it clearly fits the definition of a scholarship, it is indeed considered a stipend. That is how the organization classifies it, and yet I can't find use of that word in particular in any IRS guidance. 

Please forgive me for asking this, I did think I knew how to do it but other than trying to override the schedule 1 to get the information on line 8r, how do I answer the questions in TT to get it to go there? When I do enter on the schedule 1 myself, it does still trigger the kiddie tax (gets recorded on line 8 of 1040). There is also some regular w2 wages but total off all remains at about 11k. 

Thank you SO much for your help!

[Hal_Al]

It will tell you that the Kiddie tax form 8815 is trigger (and you can't use the free edition of TT) but there is no actual kiddie tax because his taxable income is $0 (his standard deduction is more than the $11K "earned/hybrid income").  See the calculations on form 8815. 

Q. Other than trying to override the schedule 1 to get the information on line 8r, how do I answer the questions in TT to get it to go there?

A. The way to enter stipend/scholarship income, in TurboTax, is at Deductions and Credits / Education / Expenses and Scholarships. 

After answering no to having a 1098-T*, answer yes to qualifying for an exception (that gets you to the entry screens). You will have to go thru the whole education interview to get to the scholarship screen. At the scholarship screen, enter the amount of the grant. When asked if any was used for room and board, answer yes. Then enter the amount you want to be taxable (usually all of it), in the pop up box. R&B are not "qualified educational  expenses".  So, this is how you tell TT that it is taxable. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.  This will put it on line 8r of Schedule 1.

*If you do have a 1098-T, one of the follow-up questions will be do you have any scholarships not shown on the 1098-T. Enter the additional scholarship/stipend there.