Keep all paperwork supporting your claim, in case you're ever audited on it. Then enter the 1099-MISC following the below guidance on the tax return of the recipient designated on the 1099-MISC. It's taxability will be offset later, based on the "qualified" education expenses the income was used to pay for. If your daughter is your dependent, then most likely she won't have any qualified education expenses, as you the parent claim all that. This stipend does not count as a scholarship or grant, so it's payment does not have the potential to make her 3rd party income exceed the qualified education expenses.
But she should still work through the education section anyway, because I've just got a funny feeling I'm missing something here that will probably jump out and bite your daughter when working through that section.
Reporting 1099-MISC (box 3 or box 7) that is not self-employment income
Under the Wages & Income tab (or Personal Income tab) scroll down to Other Common Income and elect to start/update Income from form 1099-MISC. Then click YES to indicate you have a 1099-MISC.
Enter the 1099-MISC exactly as printed, and then Continue.
Enter the reason you got this money – be it scholarship, bonus, streaking butt naked across the 50 yard line of the super bowl, whatever. Then continue.
Select None of these apply, then Continue.
Select No, it didn’t involve work….. and Continue.
Select ONLY the tax year for which this specific 1099-MISC was issued. Do not select the year that you received the 1099. Select the year for which the 1099-MISC was issued. Select no other year. Then Continue.
Select No, it didn’t involve an intent to earn money, then Continue.
Select NO, then Continue.
Click the DONE button, and that does it.
