turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

How can I get TT to treat 1099-G Taxable grant as earned income

My 23 year old daughter worked for NIH for the last 5 months of 2018 after graduating from the University of Chicago in June. She is applying to graduate schools and will start graduate school in August 2019. She earned 12,000 at NIH in 2018 and it was reported as a Taxable Grant on a 1099-G. TurboTax is treating this as unearned income and taxing it at my tax rate. This seems wrong because she is WORKING 40 hours a week at NIH as a researcher. How can I get TT to treat this as earned income?


x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

7 Replies

How can I get TT to treat 1099-G Taxable grant as earned income

A taxable grant is reported in box 6 of form 1099-G and so is unearned income. 

How can I get TT to treat 1099-G Taxable grant as earned income

I have the same issue.  Turbo tax is treating the NIH taxable grant as unearned income as though it is from investments.  It should not be here and form 8615 should not be required.  Looks like a Turbo tax error.  Please fix.  There should be a questionnaire that makes a difference between taxable grants and market gain, etc.

How can I get TT to treat 1099-G Taxable grant as earned income

Also Turbo tax does not properly treat the NIH Post Bac 1098-G taxable grant. The way Turbo tax software treats it if you follow their questionnaire, it shows up under unearned income, and misc income. The only way to have it property show up in 1040 line 1, and not unearned income (which triggers filing of an 8615 form and a punitive tax for the dependent), is to follow the Turbo Tax cpa advice to report this on a 1098T. Basically make NIH the school, fill in no educational expenses, and a scholarship of the amount of earnings. You may have to recheck in the actual form that it gets entered correctly there. The first time I entered in the questionnaire, but it did not show up in the 1098T form as scholarship. This makes the amount show up property in 1040 line 1, (Amount - Sch) as per IRS Publication 970 page 6, and IRS, and makes it not show up as unearned income, as per IRS Publication 929 pages 14, 17, 18, since it is not. I sure hope Turbo Tax fixes this before next year, and PS the regular folks at Turbo Tax just tell you the software is correct, when it isn't....I heard on one posting someone actually paid this tax, which can be substantial if your child is a dependent.....

How can I get TT to treat 1099-G Taxable grant as earned income

The same issue persists currently while working on 2020 tax returns for fulltime work as a NIH IRTA researcher.  Is there a work around to mark it as as earned income?

Cynthiad66
Expert Alumni

How can I get TT to treat 1099-G Taxable grant as earned income

The 1099-G is also used to report less common sources of income, including taxable energy grants, agricultural payments, and others.  

 

Taxable grants should be reported as MISC other income.  Should not be on line 1 of the tax return unless it is wages.

 

Use this workaround:

 

This is taxable income not subject to self-employment tax. 

The key to getting TurboTax to treat it as other income is to follow these steps:

 Enter the 1099G as a 1099 MISC Box 3

On the next screen Describe what the payment was for

On the next screen select "none of these apply"

On the next screen select "No it didn't involve work like my main job"

On the next screen select "I got it in 2020" ONLY 

On the next screen select No, it didn't involve intent to earn money

 

TurboTax will put the amount as other income.

 

1099MISC

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Anonymous
Not applicable

How can I get TT to treat 1099-G Taxable grant as earned income

@Cynthiad66 Following your advice to report as 1099-MISC for a taxable grant for summer research at NIH that was reported on a 1099-G. Taxpayer also had some wages from a summer job in California, and is dependent of parents who pay their education expenses. Entering the NIH taxable grant as a 1099-MISC, 1099-G, or 1098-T all generates a Form 8615, which in turn generates a form 3800 for California. Form 3800 asks for parents' income from CA 540NR on CA form 3800, but parents do not need to file taxes in CA, as they are residents of and all income is from a different state.

 

I am still unclear on whether to follow your advice or that of @oaklander and @MaryK4 from this thread about 1099-G. (Using TurboTax 2021 Home and Business for Mac.)

 

KrisD15
Employee Tax Expert

How can I get TT to treat 1099-G Taxable grant as earned income

Since this is a Fellowship, it will count as "unearned Income" for the student. 

The student should file a non-resident state return for California and a resident state return for the state in which you live. 

Since she is a dependent and a student, she is considered a resident of your state and only temporarily away. 

 

If the program still issues a CA 3800 for the student, enter 0 as your California income. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question