How do I account for 1099-MISC, Line 3 "Other Income" from a Teach for America Stipend in the most tax efficient manner?

[joev2]

Is a Teach for America stipend treated as fully taxable income, including requiring self employed FICA and SS taxes?

[DianeW777 · Accepted solution]

It is considered 'Other' income and is not subject to social security and medicare taxes. 

This income is not business income, rather miscellaneous as indicated by your Form 1099-MISC. It's your money as a stipend not because of a service you performed.

It's important for you to select 'None of these apply" and then you should also select the following:

'No' on the screen 'Did the '____' involve work that's like your main job?'

'No' on the screen 'Did the '____'  involve an intent to earn money?'

This will report the income without any business activity and it will show up on Form 1040, Line 8 (From Schedule 1, Line 8z).

You can use the Preveiw My 1040 to see the income on the appropriate lines of your return.

Other Miscellaneous Income:

1. Sign into your TurboTax Online account
2. Go to Tax Home (left panel)  Wages and Income  section 
3. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
4. Select Other reportable Income > Enter a description (----) and the amount

1. From the left rail menu in TurboTax Online, select Tax Tools (You may have to scroll down on the left rail menu.)
2. Select Tax Tools 
   
3. On the drop-down select Tools 
4. On the pop-up menu titled “Tools Center”, select View Tax Summary 
5. On the left sidebar, select Preview my 1040 

For TurboTax Desktop, change to 'Forms' and review the forms 

[DAD66]

When I follow the instructions, it does wind up as additional income BUT the problem is it is then counted as unearned income. This then changes the standard (for a dependent) and triggers the kiddie tax! The student didn't even earn enough to have to file at the federal level so owing the amounts that result from this methodology doesn't seem right. 

Any other assistance would be appreciated. 

[DianeW777]

The stipend is not required to be reported as 'other income'. Keep the 1099-MISC in the tax file and delete that form from the return.

• If you're using TurboTax Online software and need to delete a form, click here.
• If you're using TurboTax Desktop software and need to delete a form, click here.

Reporting: Taxable, non-W-2 stipends are usually reported on Form 1040, Schedule 1, Line 8r as "Scholarships and grants not reported on Form W-2".

• To enter  scholarships, grants, stipends (With or without a 1099 or a 1098-T):
  1. Click on the Deductions & Credits 
  2. Scroll down to Education (if Education is not there, click on Check for more tax breaks).
  3. Select Expenses and Scholarships (Form 1098-T).
  4. On the Do you want to enter your higher education expenses? screen, select Yes.
  5. Continue with the onscreen interview until you get to the Add any other financial aid screen.
  6. Enter the amount of the stipend in the box Other scholarships, grants, or fellowships
  7. This will be show on Schedule 1, line 8r, then carried with any other entries to the 1040.

@DAD66 

[DAD66]

Thank you. After weeks of doing as deep of a dive was possible on the matter,  I believe this in fact the best way to go. It does make me a bit uneasy to not have that 1099-misc "on the record" but I don't know how computer checks and balances go at the IRS so hopefully the actually total income matching is what matters?

I will also note I called Turbo Tax on this issue, and they originally said to put it under other income as a negative number, and then when I said that  made no sense they changed it to putting it in as a positive number. I do hope they not only get a better work around (you actually have to answer questions falsely to do this, such as suing a line that asks you to enter the other scholarship if you did not get any forms) and more informed people to help out (I have called more than once, and the answers here in the community on this matter are contradictory/incomplete in many cases). Having said that I am glad I found two people here that gave this answer as it makes the most sense. Thank you.