1099-NEC Graduate Student

[valbbriones]

Hello,

I am a graduate student who gets monthly stipends, and was sent a 1099-NEC, which is for those who are considered self-employed. Does anyone have any experience or recommendations for how to navigate differentiating between a student and self-employed individual. I would be charged self employed taxes, which seems crazy considering what I get paid. Thanks in advance!

[DavidD66]

When you enter your 1099-NEC, it will automatically flow to Schedule C and be considered self-employment income, and subject to self-employment tax.  If your stipend is for services you provide as a graduate research assistant, or graduate teaching assistant, and it is reported on Form 1099-NEC, then you are self-employed in terms of that work/income.

[Hal_Al]

Who paid you and why?  That is, what did you do for the money?  Under some circumstances, you could well  have self employment income.  Student research stipends are usually taxed as scholarships.  But, scholarships should not be reported on a 1099-NEC (or 1099-Misc).  Student-employees of a college are not usually subject to social security and Medicare tax.  You will probably have to use a workaround in TurboTax (TT).

The IRS considers anything on a 1099-NEC to be self employment income. If you try reporting it as anything else, you chances of hearing from the IRS are high.

[valbbriones]

I am paid through the National Science Foundation (NSF) as a student researcher through their fellowship. I was sent an 1099-MISC the previous year, which I was able to report my income as fellowship so was not considered self-employed, however there is no option for that that I see for the 1099-NEC

[Hal_Al]

Instead of entering as  income, at the 1099-NEC screen,  In TurboTax (TT), enter at:

Federal Taxes Tab (Personal for H&B version)

Deductions & Credits

-Scroll down to:

--Education

  --Education Expenses

After entering your 1098-T (if you don't have a 1098-T, answer that you qualify for an exception). That will eventually get you to a screen to enter scholarships not shown on a 1098-T.  When asked if the scholarship was used for room and board, answer yes. When asked how much of the scholarship was used for room and board, enter the entire amount of the 1099-NEC.  That will make it taxable.  It will go on line 1 of form 1040 with the notation SCH (starting in 2022, line 8r of Schedule 1)

This next steps are optional (and in addition to entering it as scholarship).  There's a chance the IRS  computers will not match the 1099-NEC to the Scholarship income.  If you want to try to ward that off, do this:

Enter the 1099-NEC at the 1099-NEC screen. 

On the next screen Describe what the payment was for (Scholarship on 1099-NEC)

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 2020" ONLY

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

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

Then enter a line 8 deduction, for the same amount.  In TurboTax (TT), enter at:
- Federal Taxes tab
 - Wages & Income
Scroll down to:
-Less Common Income
      -Misc Income, 1099-A, 1099-C
       - On the next screen, choose – Other reportable income -  Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front.  Briefly explain at description (1099-NEC reported as Scholarship income)

[valbbriones]

Thank you for the advice, I will be sure to follow these steps to see if it works!

[Opus 17]

@DavidD66 graduate student fellowships are not self-employment income and are not subject to SE tax or social security.

@valbbriones unfortunately, when the IRS split off 1099 income into the 1099-NEC (non-employment compensation) and the 1099-MISC (everything else), Turbotax also split up the interview in a poorly implemented way.

In the old 1099-MISC interview, there was a list of special circumstances and a checkbox for "this was fellowship income" that would have taken care of the problem in one step.  I would look to see if there is a similar question now in the 1099-NEC interview.  If so, you can skip entering the income under the education expense interview and also skip the "offset" method.