Making a Roth IRA Contribution with Fellowship Stipend income

[nx1979]

I am receiving a Fellowship Stipend from my PhD graduate program. I have entered my 1098-T showing the appropriate amount of excess scholarship or grants funding over and above the amount in Box 1 expenses. So I have a generous amount of taxable stipend "income". But TurboTax does not allow me to enter a Roth IRA contribution without a penalty for excessive contributions. The SECURE act should allow for this. How can I fix?

[ReneV4]

You are correct. The SECURE Act does allow for this, so the key is to input the excess scholarship stipend as "earned income".

To input your taxable stipend income so that it is part of your earned income, do the following:

1. Go to Income in the Federal section and select Wages and income summary at the bottom of the drop down menu that appears
2. Next, scroll down to Less Common Income and click the down arrow to show more options
3. Select Miscellaneous Income, 1099-A, 1099-C, by clicking Start
4. On the, "Let's Work on Any Miscellaneous Income", select "Other income not already reported on a Form W-2 or Form 1099", by clicking Start
5. Next, select the "Other earned income" box, then Continue
6. In the, "Any other earned income" section, enter a description and the amount, then Continue

Verify the amount transferred correctly: 

1. Click Tax Tools on the left panel
2. Then, Tools
3. Then, View Tax Summary
4. Then, Preview my 1040, located above Tax Tools on the left panel
5. Look at Line 1h (Other earned income)

[nx1979]

Thanks for the reply. When I enter the stipend as earned income it adds to the amount that was calculated previously on my 1098-T form. So I'm double entering the taxable amount. Is there a way to correct this and still allow for the Roth IRA contribution?

[user17731033538]

Some softwares have not caught up to the current tax code and thus you may need to consider a different tax software. This what I have anecdotally read via blogs

[AmyC]

When you went through the education section, it asked if the scholarship was used for graduate or postdoctoral study and that must be answered yes for the IRA eligibility. If you did, and the program still disallowed the ROTH, it must be entered as @ReneV4  states. 

Caution: This means that you are no longer entering the full stipend in the education section. Instead, the nontaxable portion remains in the education section. The taxable portion is what you remove from the education section and is the amount reported under Other Income.

[nx1979]

How can i remove the taxable amount from the education section without altering the 1098-T form?

[nx1979]

Unfortunately, i cannot figure out how to remove the taxable amount from the education section without changing the 1098-T form amounts. So I am now getting duplicate income.

[AmyC]

I am so sorry! The 1098-T is an informational form not a tax form. You can change the amounts on the 1098-T to reflect your reality. It is not like a w2 which must be entered exactly.

[nx1979]

Thanks! I will reduce the amount in box 5 of the 1098-T by the amount I add to the income section. That should allow me to do the roth ira.

[nx1979 · Accepted solution]

Actually, I just realized that one of the questions in the educational section asks if the amount of box 5 in the 1098-T was included in income section (W2 or 1099-MISC). Once I checked that and entered the amount in the income section, everything worked! I was able to add the Roth IRA. And didn't have to change the 1098-T amounts.