1099-MISC for a scholarship

[Rsinon]

My wife received a 1099-MISC for a scholarship.  When I enter it into TurboTax, it is trying to show it as business income and enter it into Schedule C.  This does not seem right as it was a payment she received for completing courses.  Do I leave the Schedule C or take it off?  She only has one 1099-MISC and no other "business income".

[KathrynG3 · Accepted solution]

It depends. If your wife is in graduate school, then there is a special tax treatment. Mainly, report Form 1099-MISC exactly as received since the IRS receives a copy. They will be looking for the income on your return.

To move the income from Form 1099-MISC to another art of your return, such as Line 1,  Do this:

1. From the left menu, select Federal
2. Wages & Income scroll all the way down to Less Common Income and click Show More
3. Select the last listed option for Miscellaneous Income 1099-A, 1099-C, click Start
4. Next, select the last listed option Other Reportable Income
5. Did you receive any other taxable income, click Yes
6. Other Taxable Income: Enter your description and the amount and click Continue and Done. Disregard the comment "Do not enter income from Form 1099-MISC here" because this is meant to guide taxpayers reporting typical 1099-MISC income. Your case is less common and this is how you can report it in TurboTax. 

Secondly, in this scenario, to be in compliance with the IRS and report Form 1099-MISC you received, report it as "an in and out."

1. Repeat Steps 1-6 and enter the income amount as a negative 
2. For the second description write: Form 1099-MISC reported as Scholarship

If this is your scenario, the instructions above will

• get the scholarship to the appropriate line where it belongs
• prevent the scholarship from being considered self-employment

You will see on the Other Miscellaneous Income Summary the full amount received and the full amount reported as a negative.

The IRS expects this treatment if you need to report it somewhere else on the return.

Click these articles for more information:

Where do I enter a 1099-MISC?

Are my scholarships, fellowships, or grants taxable?

[Rsinon]

Where else should I report this as on my return?

[KrisD15]

You can report it this way:

Click Federal

Click Wages & Income

Click “See All Income” if needed

Scroll down (PAST SELF-EMPLOYMENT) to “Other Common Income”

Click “Show more”

Scroll down to “Form 1099-MISC”

Click Start

Enter the 1099-MISC and Continue

On the “Describe the reason for this 1099-MISC” screen enter "Scholarship” and Continue

Select “None of these apply” and Continue

Select “No, it didn’t involve work like main job” and continue through the interview selecting the appropriate answers

The amount from the 1099-MISC will be reported as Other income on the 1040 line 7a, not as Self-employment

The IRS wants scholarship income listed on line 1 of the 1040, and if it were entered from a 1098-T, that is where the TurboTax program would put it. 

As KathrynG3 says, you can make a negative entry to negate this income. IF THAT IS WHAT YOU WANT TO DO, after making the negative entry in the "Other Common Income" section, you would continue to the "Education" section under "Deductions & Credits".

Go to Federal

Deductions & Credits

Scroll down to "Education" and click Show more

Scroll down to "Expenses and Scholarships (Form 1098-T)" and click Start

Answer "No" you don't have a 1098-T, and "No" you don't have an exception, until you can enter the amount of a scholarship.

Enter the amount reported on the 1099-MISC here if you are sure it is a scholarship. 

(if you're not sure, you can just leave it entered as "Other Common Income")

[bluay]

Hi,

I have the same problem. Is the method you are describing known to the IRS and is it the expected treatment by IRS to rectify the 1099-MISC/scholarship issue?