Error in TurboTax handling of (new) Schedule 1 line 8r scholarship income for determining IRA contribution limits

[DNich]

it is April 9th and this is not fixed. And yes my stipend is reported on line 8r

[DanaB27]

During the IRA contribution interview, you will get a screen "How much of the taxable Scholarship was for Graduate or Post-Doctoral Studies". You will need to enter the amount that applies to it here.

"Certain non-tuition fellowship and stipend payments not reported to you on Form W-2 are treated as taxable compensation for IRA purposes. These amounts include taxable non-tuition fellowship and stipend payments made to aid you in the pursuit of graduate or postdoctoral study and included in your gross income under the rules discussed in chapter 1 of Pub. 970." (Pub 590-A)

@DNich 

[DNich]

Dana,

I am using the premier version of TurboTax. You stated "During the IRA contribution interview, you will get a screen "How much of the taxable Scholarship was for Graduate or Post-Doctoral Studies". You will need to enter the amount that applies to it here."  I do not see any prompt in the IRA section that asks about graduate studies. 

In the education section, under the 1098-T section, I checked the box graduate student, as directed by other advisors on this board.

There is also a prompt that says "did your aid include amounts not awarded for 2022 expenses?" I checked "no", because all of the award was for 2002.  

Then there is a prompt "did you pay for room and board with a scholarship or grant" - I said yes, because that is what my fellowship is for. How much ....was used to pay the expense, I inserted all of my taxable scholarship money here. 

However, I still cannot make an IRA contribution without getting a penalty, and on my state taxes the amount from schedule 1, line 8r transfers as unearned income. Which because I am a post-graduate fellow it should be earned income.

I have spend hours on this. I'm hoping you can help me.  

[DNich]

please ignore my last post - 5 minutes ago - I found the prompt you were referring to. I needed to say yes to the question "Do you have any excess Roth contributions" to get to this prompt.

[bradlesl145]

Turbotax does not treat taxable non-tuition fellowship and stipend payments reported via a 1099-G correctly (i.e. not on a W-2), but HR Block does.  IRS Publication 590-a is absolutely crystal clear in stating for IRA purposes that "Compensation includes ... taxable non-tuition fellowship and stipend payments" and since 2019, "Taxable non-tuition fellowship and stipend payments. For tax years beginning after 2019, taxable non-tuition fellowship and stipend payments are treated as taxable compensation for the purpose of IRA contributions". 

I was on the phone with Turbotax support for over an hour, but they refused to admit this glaring error in their application and tried to force me to upgrade for a fee.

I re-entered everything into HR Block's application, which asked the proper questions and treated the 1099-G-reported fellowship grant as income for IRA contribution purposes.

I'm considering moving another five family member's tax preparation to HR Block as a result.