@john8791 wrote:
@DawnCThere are not necessarily "expenses" associated with this. As the OP said, this is a stipend given by an agency to encourage early childhood to stay with their jobs. I suppose if a teacher spent money on getting further education this could be considered an expense?
Other than that, the teachers are just doing their regular jobs during regular working hours.
Because this was compensation for services performed, you are considered self-employed with respect to this income. You would report the income on schedule C and pay income tax and self-employment tax. Your business name can be your own name, your tax ID is your own SSN.
If you report this as "other income", you WILL get an IRS letter asking you to file a schedule C and SE and pay self-employment tax. You would have the option of replying to the letter with an explanation of why this is not considered "compensation for services performed." I can't guess if the argument would be successful.
Now, there is something called a SPIFF, or Special Performance Incentives for Field Force. Normally, this refers to incentives for selling cars or other hard goods, where the salesperson is an employee of the dealer, but they also get incentive payments directly from the manufacturer. The IRS has taken the position that these incentive payments are not self-employment income, are not reported on schedule C, and are not subject to self-employment tax, because the salesperson is not directly working for the manufacturer who pays the incentives. Here are some old forum posts on the topic.
https://ttlc.intuit.com/community/taxes/discussion/i-have-miscellanous-income-which-is-bonus-pay-fro...
https://ttlc.intuit.com/community/taxes/discussion/re-spiff-special-performance-incentives-for-field...
You might take the position that this is a similar incentive payment, and because you are not providing a service to the actual payor, this is not compensation, and should be reported as other income instead of self-employment. But this is a risk you will have to take, or consult with a professional tax advisor in your area. No one on this board is able to stand behind you at audit.
