Entering graduate student fellowship income from 1099-misc

[tcdixon44]

I have a graduate student fellowship that provides us with tax information on a 1099-misc. However, I have heard that this is not supposed to be entered as self-employment income, as it is simply for support during pursuit of a graduate degree. How should I enter this information?

[GeoffreyG]

You are correct that you do need to pay ordinary income taxes on your fellowship income, as reported to you on Form 1099-MISC, but do you do not have to pay Social Security and Medicare taxes, as you would if this were instead self-employment income.  Please allow us to explain that. 

Academic institutions, research facilities, and certain government agencies will often report fellowship income in various or nonstandard ways, especially at the graduate and postdoctoral levels.  It's certainly not an uncommon occurrence; but yes, the fellowship income you receive is definitely considered taxable compensation.  As such, you do (legally) need to declare it and report the information on your income tax return.

This can be accomplished in the TurboTax program, both in the online (web-based) software as well as in the desktop versions of the program.

The mechanical steps to do so are outlined at the following AnswerXchange post from a few years ago:

https://ttlc.intuit.com/questions/2638576-how-to-report-a-fellowship-stipend

Those general processes remain accurate for the current (2016) tax year of the TurboTax program (i.e., either of those described will work just the same).

Both as a test of this, and as demonstrable proof for this answer, I ran a (hypothetical) academic fellowship of $3,000 through the federal tax program.  In fact, I did it in both of the ways described on that other post, and the results came out just as expected, without any errors present.  (Please see the attached screen-capture image for a visual aid; simply click to open.)  As desired, the notation "SCH" appeared on Line 7 of Form 1040, and the $3,000 test amount was added to taxable wages.

I have full confidence that this method will work for your tax return, too.  Just substitute the actual fellowship income total you have for the $3,000 used in the demonstration example.  The good news is that, as we noted above, while your fellowship income is taxable as ordinary income, at least you do not have to pay Social Security and Medicare taxes on it, as you would if the income were alternatively taxed as ordinary W-2 wages.

Thank you for asking this important question, and good luck with your graduate studies.