@PrivateIdaho wrote:
Thank you very much for your help, but she’s not self employed. She worked as a research assistant at a university for six weeks over the summer. She doesn’t file as self employed and doesn’t have any paperwork to show that she’s self employed. She doesn’t have a side gig or anything. During the school year she’s an academic tutor. Does this change anything? The poor kid is facing a $900 tax bill even though she only earned $9500 all year. Thanks.
That's a bit complicated. If she was self-employed, she owes 15% self-employment tax even though she doesn't owe income tax. However, being a "student" is not considered self-employed, and the stipend is not considered "compensation for work" since it is technically education and not work. This is probably why the school reported the stipend on a 1099-MISC instead of hiring her as a W-2 employee.
The next question is, was she a research assistant at her own college, or someplace else, and if someplace else, did she get school credit for it? Or was the stipend paid by a granting agency rather than the money passing through the school? If either answer is yes, then this is not self-employment.
However, if she was working at a different school, and it was more work for hire rather than education, then it might be considered self-employment even though the school reported it differently. I would need more details to think about that situation.
Because it was reported on a 1099-MISC, it is less likely that she would be audited for failing to report it as self-employment. Assuming that it was "School", she needs to answer the test questions as NO -- not like work, not for a profit, not similar to any past or future job (because it's not a job, it's school). She should file a return even though no tax is owed, because the statute of limitations only starts if she files -- if she files, the IRS has 3 years to come back and ask whether this was really school or a job. If she never files, the IRS can theoretically audit her at any time in her life.
If you want to discuss more whether this counts as a job or education, I would need to know more about the position and who paid the stipend.
