1099 NEC child summer Internship

[EDUES]

My 18 years old child student got a 1099 NEC from his school installing computers in summer as an Internship and made $ 1500.

I know he has to file his own taxes but is very confusing how to do it. Turbo tax send to to do schedule C ? He has no a business.... no idea how to fill it out or T tax has an option that show   (  this is no money earned as an employee or self employed individual, it is from a sporadic activity or hobby.... some other post  have totally different ways to do it....lots of taxpayers lost like me thank you

[Bsch4477]

Report as other income. 

Federal Taxes -> Wages & Income -> I'll choose what I work on -> scroll to the bottom and under Less Common Income select Start (or Update) for Miscellaneous Income.... You'll find all sorts of other income categories in there. If none of those shown fit the bill then pick Other reportable income and you can enter your own description(s) and amount(s).

[gems7798]

Our daughter also 'earned' $ from a college internship and received a 1099-NEC. I can see where to enter the information from the form received.  An NEC form says at the top that it is for is for Nonemployee Compensation. So, I would take it from that, that the entity paying the student didn't consider them an employee.

In the follow-up Turbo Tax asks if the income is:

-from owning a farm

-income that should have been on a W-2 instead

-from a lawsuit settlement

-not earned as an employee or from self-employment, (rather) from a sporadic activity or hobby

-a Medicaid waiver payment

-none of the above

If the entity issued an NEC then they aren't considering the student an employee, yet the student didn't consider themselves self-employed. So it is correct to choose that it is from sporadic activity? Or should 'None of the above' be chosen?

Thank you.

[Bsch4477]

Yes. 

[EDUES]

Thanks for answering,  

1. If I select other income, and do not put in the 1009 NEC in, for sure IRS will contact me and say Hey where is the 1099 Nec you got from your school are you trying to avoid paying Self employment tax .( social securityand Medicare)...so I am still confused 

2. Last person reply, If you follow what you said you will land doing schedule C and paying SE taxes...which is a lot around 15%..

3. I am still lost , do you have to pay self employment tax for an internship or not, ...

[Bsch4477]

The IRS will see the amount on the 1099-NEC accounted for in other income. In the unlikely event of an audit you would just explain the situation. She should not be paying self employment tax since she doesn’t have a business. 

[fanfare]

If you enter a 1099-NEC as other income you are fudging and hoping the IRS does not audit you.

any NEC income over $400 has to pay SE tax. Schedule SE.

the "business " is a sole proprietorship. Schedule C.

[Vanessa A]

The 1099-NEC should be reported on Schedule C.  The school did not consider her an employee for the summer internship.  Instead, they considered her an independent contractor.  This doesn't mean she has a business, it simply means she performed a service for someone but was not their employee.

Whether or not she considered herself self-employed does not play a role in the determination of how the income is taxed. 

If this "job" lasted for the summer, that would not be a sporadic activity. It is also not a hobby.

Was this the college she attended or was it another college?  Did she work with the intention of making money in addition to getting experience?

If her internship would be at a stand alone veterinary clinic working as a tech because she is studying veterinary medicine, and they did not consider her an employee, then this would be income as an independent contractor subject to self-employment tax.  

On the other hand, if she worked at the vet clinic at Cornell, where she attends college, as a pre-requisite for graduation, this could then be entered as other income with a description of Taxable Stipend. If this is the case, you can enter it by selecting 

• Income
• Show More next to Less Common Income
• Start next to Misc Income
• Start next to Other Reportable Income
• Enter the income as Other Taxable Income with a description of Taxable Stipend from XXX college and the Amount

This will enter the income on line z of her Schedule 1 with a description which will then flow to line 8 of the 1040.  It will be taxed as ordinary income instead of self-employed income. 

The type of work she did, why she did it and who she did it for does determine if it is self-employment or a taxable stipend/scholarship.  If it does not fall into the category of scholarship/taxable stipend, then it does need to be reported on Schedule C. 

[gems7798]

In our daughter's case, her internship was for college credit with the college arranging/overseeing the communication between student and entity and reviewing a paper written at the conclusion before awarding credit. But she wasn't working directly for the college, but rather a local museum. I *think* the contract used the term stipend (daughter discussed a little of the contract, but I never actually got to see it). It wasn't for the full summer, but a certain number of weeks/hours--so not sporadic? Also, the stipend was less than half the $4000 limit another poster mentioned. She lived on campus during the internship and the stipend didn't even recoup the costs of the tuition, fees, room&board. So, while she was hoping for an internship that would help reduce the costs, the internship was more for the experience than the $ (if just for $ she would have moved back home for the summer and resumed her previous summer job!).

Does any of that help or just make it as clear as mud?

Thank you!

[DianeW777]

Yes, it helps.  The income is considered as independently performing a service for the museum, that was a benefit for her.  She was not considered an employee and she is not self employed for this specific income.  This income should be reported on her tax return as follows:

Go to the Wages and Income  section of TurboTax

1. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
2. Select Other reportable Income > Enter a description (Stipend) and the amount

Keep the information details and the income reporting document with your tax return. 

• Stipends - Everything You Need to Know

@gems7798 

[EDUES]

She worked at the school installing new computers for 6 weeks. The form 1099 NEC payer Is Miami Dade county Public schools, the form shows Summer Youth Internship program paid as stipend..

[Vanessa A · Accepted solution]

If your form is showing that it was a Summer Youth Program paid as a Stipend, then you would enter it as Other Reportable Income by selecting 

• Income
• Show More next to Less Common Income
• Start next to Misc Income
• Start next to Other Reportable Income
• Enter the income as Other Taxable Income with a description of Taxable Stipend from Miami Dade Public Schools and the Amount

[gems7798]

Now that our daughter is home, we're trying to finish up her taxes and put this advice into use. But the process has turned up additional questions. 

The link about stipend information mentioned that perhaps it won't be the full amount taxed.  What goes toward educational costs are not taxed, but what helps defray living expenses does.

Stipend $1500

Tuition & allowable fees: $971.96

Boarding charges: $1440 (stayed on campus)

So do we only report $528.04? ($1500-$971.96) These educational costs were included in her 1098T, so I wasn't sure if deducting them from the stipend reported was double counting it.

I noticed that recording the stipend amount in the manner instructed, meant that TurboTax considered it Unearned Income taxed at our tax rate because of her age and being our dependent.

Thank you!

[AmyC]

Options and thoughts:

You only have 4  undergrad years to claim American Opportunity Credit. Since this 1098T is a lower amount, it may not be worth claiming AOTC this year.

If you are not claiming AOTC:

• You want the taxable amount to be the $528. You can enter the full amount and expenses or you can enter the taxable portion.
• The tuition has no out of pocket cost, no credit.

If you are claiming AOTC:

• You want the full amount  of $1500 taxed.
• This allows you out of pocket costs for tuition and can claim AOTC.

Scholarship income is a hybrid income. It counts as wages when determining if you should file a return. Then it changes form and becomes passive income to determine if you have a kiddie tax. See What is the Kiddie Tax?

@gems7798