Fellowship

[ik]

Fellowship

Hello, 

My son received fellowship for his work at a certain organization after he graduated college. Fellowship was his only compensation. He didn't receive 1099, instead his university sent him a letter : "The amount paid to you as a fellowship during the calendar year was $XXX. In accordance with IRS regs, our University does not report on IRS Form 1099 Misc the amount paid as fellowship to US citizens. Nonetheless, the income you received will generally be subject to federal and state income tax".

My question is, can my son deduct his travel, housing, meal etc. as a business expenses to lower the fellowship amount? 

Thank you so much!

[ik]

Hello, 

My son received fellowship for his work at a certain organization after he graduated college. Fellowship was his only compensation. He didn't receive 1099, instead his university sent him a letter : "The amount paid to you as a fellowship during the calendar year was $XXX. In accordance with IRS regs, our University does not report on IRS Form 1099 Misc the amount paid as fellowship to US citizens. Nonetheless, the income you received will generally be subject to federal and state income tax".

My question is, can my son deduct his travel, housing, meal etc. as a business expenses to lower the fellowship amount? 

Thank you so much!

[Opus 17]

No.  An educational fellowship is not self-employment income.  You do not need a schedule C and don't pay self-employment tax, but there is no provision to deduct expenses from fellowship income.  This can be reported as "other" income, there should be a box to check for fellowship, or I believe you can enter it through the educational expenses interview, if you keep going past the 1098-T questions. 

[ik]

Thank you Opus 17! My son graduated from the university first. The fellowship work began after he received the diploma. Is it still considered as an educational fellowship?

Thank you!

[Carl]

My son graduated from the university first. The fellowship work began after he received the diploma. Is it still considered as an educational fellowship?

If he graduated in 2019 and was paid the fellowship in 2019, then the answer is yes. Pay attention to the interview questions. Some ask if he was an undergraduate on ***JANUARY FIRST*** of the tax year. The answer to that question would be a resounding YES. Other questions ask if he was an undergraduate on DECEMBER THIRTY FIRST of the tax year. The answer to that question would be NO since he graduated before that date.

[Opus 17 · Accepted solution]

I would say yes based only on the wording of that letter.  If it was not part of his educational program in some way, it probably should have been treated as a job with a W-2, and universities don’t usually make that mistake.  But I would need to know a lot more details to have a better idea and even then, I can’t give you legal advice.