topic Box 7 in Retirement tax questions

How do you enter tuition remission (over $5,250) that is non-taxable as a fringe benefit?

wgk1989 — Sat, 01 Jun 2019 03:43:15 GMT

I’m in a weird tuition situation: I work at a university as an ROTC instructor. All of my compensation and other allowances are paid by the US government and are considered Active Duty allowances, but the university provides faculty tuition remission to ROTC instructors as a fringe benefit (I am not employed by the university, nor have I signed any contract or other documentation). My understanding is that the tuition remission, as a fringe benefit, is not taxable even over the $5,250 amount - how do I enter this in TurboTax?

You are correct, tuition remission is usually tax free. I...

Hal_Al — Thu, 16 Apr 2020 22:44:52 GMT

You are correct, tuition remission is usually tax free. It does need to be entered anywhere even if reported to you on a form 1098-T. However, if you get a form 1099-Misc, reply back for instructions.

I got a 1099-Misc (amount incorrect, but that's a separat...

wgk1989 — Sat, 01 Jun 2019 03:43:18 GMT

I got a 1099-Misc (amount incorrect, but that's a separate issue). The total amount far exceeds the 5,250.00 as expected.

Is the amount in Box 7 or box 3?

Hal_Al — Sat, 01 Jun 2019 03:43:19 GMT

Is the amount in Box 7 or box 3?

Box 7

wgk1989 — Sat, 01 Jun 2019 03:43:21 GMT

Box 7

Bad news and more bad news. The university is saying you...

Hal_Al — Sat, 01 Jun 2019 03:43:22 GMT

Bad news and more bad news.
The university is saying you are not an employee and do not qualify for tax free tuition remission. They are probably right.
The IRS considers anything in box 7 of 1099-MISC to be self employment income. In addition to income tax, you'll also have to pay self employment tax (social security & Medicare). They are probably taking the attitude that this is additional compensation related to your regular job and therefore subject to social security & Medicare (FICA) tax (employer reimbursement over $5250 is subject to FICA).
Enter at the 1099-Misc screen in Turbotax

Re: Bad news and more bad news. The university is saying you...

DJP62 — Thu, 16 Apr 2020 22:05:22 GMT

What if the amount is in box 3? Do I just disregard 1099? Turbo Tax seems to be trying to force me to do a Sch C the way I've done it. Thanks.

Re: Bad news and more bad news. The university is saying you...

KrisD15 — Thu, 16 Apr 2020 22:17:11 GMT

Box 3 "Other Income" could be scholarship or education assistance.

Do you have any statements or 1098-T that shows you paid tuition with it?

Re: Bad news and more bad news. The university is saying you...

Hal_Al — Thu, 16 Apr 2020 22:51:07 GMT

Box 3 is still taxable, but is only subject to income tax. You will not pay any self employment/FICA tax.

The IRS considers anything in box 7 of 1099-MISC to be self employment income. TurboTax (TT) aggressively steers you in that direction, even if the amount is in box 3.

That said, the key to getting TT to treat it as other income is to follow these steps:

Enter the 1099-Misc

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 2019" ONLY

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

TT will put the amount on line 8 of Schedule 1 as other income

If you are dependent on someone else's return, reply back for further instructions.

Re: Bad news and more bad news. The university is saying you...

DJP62 — Fri, 17 Apr 2020 20:05:55 GMT

The tuition remission is for our daughter who no longer can be counted as a dependent. That to say, yes, SHE has a 1098-T that shows the amount paid & the amount received as a "scholarship or grant" - the latter being the amount for the 1099-MISC given to my husband. What are your thoughts? I appreciate the input.

Re: Bad news and more bad news. The university is saying you...

DJP62 — Fri, 17 Apr 2020 20:09:40 GMT

Thanks so much.
D

Re: Bad news and more bad news. The university is saying you...

Hal_Al — Fri, 17 Apr 2020 20:20:47 GMT

@DJP62

"SHE has a 1098-T that shows the amount paid & the amount received as a "scholarship or grant" - the latter being the amount for the 1099-MISC given to my husband"

Are you saying the amount on the 1099-misc is duplicated in box 5 of the 1098-T? If so, when she enters the 1098-T, in Turbotax, she should subtract the 1099-misc amount. It should not be reported as income on your tax return and scholarship on your daughter's return. Since you and your husband have paid tax on it, it is not tax free scholarship and should not be reported as such on your daughter's return.

The 1098-T is only any informational document. The numbers on it are not required to be entered onto your tax return.

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. Clearly, the school is unaware that you husband got a 1099-Misc