@CR_Chicago wrote:
I received a 1099-MISC for a research position at my university for the summer. I also worked for the university in a different capacity and received a W2 (during the school year). I don't want to claim the stipend as self employment income because of the tax implication. Can I use the example above that was not common. Super confusing that I can make $5000 and have to pay $700+ to the federal government and another $300 to two states (where I worked and where I reside). Any suggestions appreciated
There is a difference between an internship with a private company and an internship with your school. Almost always, an internship with your school is considered part of your education, and while the income is still taxable, it is not considered work, so it is not self-employment. When you enter the 1099-MISC, apparently they removed the check box for research stipend (I think there used to be one) so you can categorize it as hobby income, it works out the same. You should not be paying "self-employment tax", but you also can't deduct any related expenses.
Separately, you are running into 2 other situations.
With your state, if you are a permanent resident of state A but you worked in state B (where the school is located), you need to file a non-resident return in state B, and a resident return in state A. Your non-resident return for state B only reports income earned in state B, while your resident return for state A reports all your world-wide income. (If you had income not from state B, like investments or a job from your home state, be sure to allocate your income sources correctly, you have to do this manually.) Your home state should give you a credit for taxes paid to the other state, which should reduce or eliminate double-taxation, depending on the state. Make sure you prepare the non-resident return first so the credit flows correctly to your home state.
Then lastly, because you are under age 24 and at least one parent is still alive, you are subject to the "kiddie tax". This was originally designed to prevent parents from having their investment income taxed at a lower rate by putting it in their children's names. Because you have unearned income (income not from working -- i.e. the research stipend), some of your income is taxed at a higher than normal rate, and your standard deduction is lower than normal. (If you are not under age 24, then the $700 federal probably represents self-employment tax, which should go away when you change the 1099 to hobby income. I don't know why your state taxes would be so high, it depends on the state. If you are a dependent of your parents, you may get less of a personal deduction in some states.)
https://www.irs.gov/taxtopics/tc553
Once you fix the self-employment issue and the 2-state issue, your tax should come down.
