Hi, I have been trying to solve this problem. I am filing jointly with my husband. From January to June 2023 my husband was a student on a F-1 visa. From August to December 2023 he started working (H1B visa) and became a resident alien for tax purposes. Overall, each of us received a W-2 from our employer. In addition, for the time he was a student, my husband received a scholarship and the usual form 1042-S. Federal taxes were withheld on the scholarship. State taxes were not withheld because the state does not tax scholarships and fellowships (code 16). He did not receive a 1098-T form because the school is not obliged to send that to international students.
We followed all the instructions to enter the W-2 information + the 1042-S information (scholarship income + federal taxes withheld). The scholarship income was reported in "Miscellaneous income" and the taxes withheld on the scholarship were reported in "Deductions>Estimated Tax payments."
However, when we do this, suddenly it looks like we owe quite a lot of taxes to the state, which is unexpected. As far as I know, the scholarship is not taxed by the state. When I delete the scholarship amount, state taxes go back to normal. How can I report this income correctly without having to pay additional state taxes?
We were advised by Turbotax experts to enter the scholarship amount as a negative number. However, that seems incorrect, because it makes our total income lower than what is reported on our W-2 forms. That is, we need to report that income because we received it, but we don't want to pay unnecessary state taxes on it.
I have been talking to Turbotax experts but couldn't find a definite answer yet. Any help?
