1099 NEC Recieved for a grant/stipend that did not require me to do any work

[mrobert3]

I work for a preschool, and applied last year for a grant/stipend through the Early Learning Coalition of my area in Florida. This particular stipend was a "stipend to offset increased medical care costs", and was a lump sum payment of $2000. No strings attached/conditions on the cash received. So I did not perform any sort of labor or services for the company I got the money from. This has made inputting it confusing. Do I truly need to report this as 1099 NEC and pay self employment taxes? Is it categorized as business income even though I did not do any work for it? Does it count as qualified business income? Is there another area this income could more accurately be listed? None of the options feel accurate, since I didn't do any business with the organization that supplied it, so I don't really know what to put for the activity that provided the income beyond "stipend". Is there any way to minimize the taxes paid on this?

[Vanessa A · Accepted solution]

Yes, you need to enter the 1099-NEC, but no you do not need to pay self-employment taxes on it. 

The income is not classified as business income.  

You should enter it in personal income under Other Common Income>>1099-NEC.  If you entered it here just go back and select the pencil so you can edit the answer to the question following the entry. 

After you enter the 1099-NEC you will be asked if any of these uncommon situations apply?  Select this is not money earned as an employee or self-employed individual.  It is from a sporadic activity or hobby. This answer does not go to the IRS, instead it tells TurboTax where to send you next and how to classify the income.  This will let the income not be taxed as Self-Employment income. 

[mrobert3]

The screen I have asks this, I would select hobby here, correct?

[DianeW777]

Yes, in this section 'Hobby' is the only selection that would eliminate social security and medicare taxes. Once  you have this entered you can check your 1040 by using the steps below.

1. From the left rail menu in TurboTax Online, select Tax Tools (You may have to scroll down on the left rail menu.)
2. Select Tax Tools 
   
3. On the drop-down select Tools 
4. On the pop-up menu titled “Tools Center”, select View Tax Summary 
5. On the left sidebar, select Preview my 1040 

For TurboTax Desktop, change to 'Forms' and review the forms 

@mrobert3 

[mrobert3]

Thank you, this was very helpful! 😁

[teacherteacher26]

I too only have this screen. I have 1099 NEC forms. One is from a grant I received to travel and the other is a professional stipend. These were one-time activities and neither required work. However, when I look at the details for "hobby" they don't apply to these situations. How should I proceed? Will I really have to pay taxes on a grant I received to travel?

[JamesG1]

Report a taxable stipend by following these directions:

• Down the left side of the screen, click  Federal.
• Down the left side of the screen, click Wages & Income.
• Scroll down Less Common Income.  Click Show more.
• Under Miscellaneous Income, 1099-A, 1099-C, click Start / Revisit.
• Click on Other income not already reported on a Form W-2 or Form 1099.
• Click on Other Earned Income.  Continue.
• At the screen Other earned income summary, select Add.
• Enter description and dollar amount.

The income will be reported on line 1h of the Federal 1040 tax return.

@teacherteacher26