Thank you for the detailed explanation!!!
Since a $4000 stipend for my son's undergraduate summer internship/research was at a different university from the one that he attends during the school year, and was reported on form 1099-MISC box 3, it gets hit with the kiddie tax, which for this particular case amounts to ~$500 federal tax + ~$200 state tax.
Yet, if the stipend income would be reported on a W2, the amount of tax would be zero. It's unfortunate that the tax code doesn't have a provision to remedy this situation.
