2024 return, 1099MISC , box 3, and other income

[aoclba]

Received a 1099MISC form for interested paid on structured notes.  Amount listed in Box 3.    Listed it as "other income" category in TT and answered the questions that it was not from self employment or any other related category.  Return still defaults to showing that amount as a business expense and insists I fill out schedule Schedule C.  

How does one get around this.  Previous post was directed to answer the question that there was "no intent to earn income" for these funds.  Despite following this advice, TT still defaulted back to insisting schedule c was necessary.  Help aoc

[DawnC]

Delete that entry (and the Schedule C that was started) and re-enter it using the steps below - 

To enter a 1099-MISC, that is for miscellaneous income, not for self-employment or rental income, follow the steps below.

Under Other Common Income, select Start or Revisit next to Form 1099-MISC.   Enter your 1099-MISC info on the Let's get the info from your 1099-MISC screen and click Continue.  

1. On the Describe the reason for this 1099-MISC screen, enter a description of the income.
2. Click Continue.
3. Select None of these apply on the Does one of these uncommon situations apply? screen.
4. Select No, it didn’t involve work like my main job on the Did the involve work that's like your main job? screen.
5. Select I got it only in 2024 on the How often did you get income for? screen.
6. Select No, it didn’t involve intent to earn money on the Did the work involve an intent to earn money? screen.
7. Select No on the Do you have another 1099-MISC? screen.

Answering differently to any of these questions will imply self-employment and generate Schedule C.

How to delete forms in TurboTax Online

How to delete forms in TurboTax Desktop

[Hal_Al]

Important: Select I got it only in 2024 on the How often did you get income for? screen, even if you get/got it more often. Lying to TurboTax to get it to do what you want does not constitute lying to the IRS. That info is not sent to the IRS.

[Vintersosa]

In the same situation but I have Box 4 (federal taxes withheld) and Box 16 (State taxes withheld) populated as well. I got 1099 MISC for fellowship with taxes withheld and its not a self-employment income, wondering how to proceed in that case.

[Vintersosa]

ah nvm, I shouldnt have put as will earn in 2025 as well!

[Hal_Al · Accepted solution]

@Vintersosa 

It's best NOT to enter fellowship income at the 1099-MISC section of TurboTax (TT)**

Enter stipend/ Fellowship

 Enter at Educational Expenses and Scholarships, under Deductions and credits (not the income section).

After answering no to having a 1098-T*, answer yes to qualifying for an exception (that gets you to the entry screens). You will have to go thru the whole education interview to get to the scholarship screen. At the scholarship screen, enter the amount of the grant. When asked if any was used for room and board, answer yes. Then enter the amount you want to be taxable (usually all of it), in the pop up box. R&B are not "qualified educational  expenses".  So, this is how you tell TT that it is taxable. Note the wording at that screen “or other expenses”. You didn’t have to literally use the scholarship for R&B.  This will put it on line 8r of Schedule 1 (this line was added in 2022).

*If you do have a 1098-T, one of the follow-up questions will be do you have any scholarships not shown on the 1098-T. Enter the additional scholarship/stipend there. 

 **Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450).  It is not earned income for the kiddie tax and other purposes (e.g. EIC).  For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

Taxable scholarship goes on line 8r of Schedule 1, from which TT treats it as hybrid income.

[Vintersosa]

Thanks!

This post mentioned though that IRS receives a copy of 1099 MISC and they expect it to be present in the tax return: https://ttlc.intuit.com/community/taxes/discussion/1099-misc-for-a-scholarship/00/1315466

Does it mean I have to do the positive/negative entry to nullify it first in the Other Income section and then follow the process you mentioned?

[Hal_Al]

Q. Does it mean I have to do the positive/negative entry to nullify it first in the Other Income section?

A. No, that's only a suggestion. Some people think it might help ward off an IRS inquiry if there's an entry on Schedule 1 directly mentioning the 1099-MISC.  I'm of the opinion that the IRS will see the amount reported (on line 8r) and that's good enough. It's a common thing.