No offense taken
Your concerns are frequently expressed in your situation. Because the 1099-MIsc was issued there is no way to avoid a red flag at the IRS, except to report it as unearned income (the1099-Misc is used for reporting unearned income). I think fiddling with the 8615 worksheet is a bigger red flag, as well as reducing the student's standard deduction
The technique described above (repeated below), to enter a negative offset, is frequently recommended, in this forum, when a 1099-Misc is erroneously issued, not just in stipend situations. But I don't think it's necessary in your situation.
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If you're concerned about the 1099-Misc not showing up on the tax forms, there's a workaround for that. But, it's not necessary.
Report the scholarship income, on Schedule 1, line 8r. Enter as previously described.
Then also report the 1099-Misc as other income, line 8z, Schedule 1 income (enter in TurboTax at the 1099-Misc screen). Then enter an offsetting line 8z deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Answer yes to Any other Taxable Income
-On the next screen, Enter the number with a minus sign (-) in front. Briefly explain at description, e.g. "1099-Misc reported as scholarship"
