Graduate Student Stipend for Roth

[jmk518]

I receive a taxable graduate student stipend that is reported on a 1099-misc. I also receive a scholarship that is reported on a 1098-T. My understanding is that post 2019, the IRS treats 1099 taxable stipend as income for the purposes of contributing to a Roth IRA, however TurboTax considers these excess contributions and subject to penalty. I ran into this last year and ended up abandoning turbo tax and using an accountant. I fee like I am faced with this again. What is the proper way to input the 1099 income such that it can be identified as a graduate student stipend? Another post said to include it in the miscellaneous income section rather than where 1099 income normally is entered. But it is still giving me an excess Roth contribution.  I don't understand why there isn't a clear explanation of this as several others seem to have posted similar questions. Anyone ever get it t o work?

[KrisD15]

The amount on the 1098-T will be treated as scholarship (if excess of education expenses) but the 1099-MISC will be reported as "Other (unearned) Income".

It can be tricky to report the amount on Form 1099-MISC as Scholarship income but it is possible.

Also, if the 1098-T shows enough expenses in Box 1, the scholarship in Box 5 might not be claimed as income. 

HERE is how to report the income from Form 1099-MISC as Scholarship income, be sure to keep documentation with your tax file.

If you also have an issue with Form 1098-T, please continue with the question and tell us the numbers in Box 1, Box 5, and how much you want to claim as taxable. 

Enter the 1099-MISC under
Wages & Income
1099-MISC and Other Common Income
Income from Form 1099-MISC    START

Once that entry is done, go to:
Wages & Income
Less Common Income
Miscellaneous Income, 1099-A, 1099-C    
Other reportable income    START

Type "1099-MISC Scholarship on line 8r " or something similar for the Description 
Enter the amount  AS A NEGATIVE NUMBER  (put a minus sign in front (-) 

Finally, return to the Education section and enter as Scholarship Income:

Enter under
Deductions & Credits
Education
Expenses and Scholarships (Form 1098-T)
Continue through the interview and enter the 1098-T if you have one, if not just ignore the screens asking about Form 1098-T and continue until you get to the "Did you Receive a Scholarship or Grant in (XXXX Tax Year)"

The program will say "Don't enter scholarships already reported on Form 1099" but in your situation, since you zeroed-out the 1099-MISC, ignore that warning and enter the amount.
 

The 1099-MISC and the negative entry will be on Schedule 1 Line 8z

The amount will also be listed on Schedule 1 line 8r

Please verify that all three entries are posted so the scholarship is claimed.

Use these steps to look at Schedule 1 

[jmk518]

Thank you. I tried this and it is still telling me that I have an excess Roth contribution. The 1099-misc stipend was added as you described,  and the same amount was entered as a negative value, also as you described. The 1099-misc is for stipend income from the scholarship. The 1098-T shows identical amounts in boxes 1 and 5, and boxes 7, 8 and 9 are all checked. No amount of the 1098-T scholarship is part of the 1099-misc income (i.e. the total scholarship received is the sum of the two numbers - the 1099-misc stipend was paid directly to me and the 1098-T funds were dispersed directly to the school for tuition.) When I enter the 1099-misc income, TurboTax identifies it as self employment income. I also have a small W-2 earned income. The amount of excess contribution to the Roth that TurboTax is calculating is the amount I intend to contribute minus the income on the W-2. What am I doing incorrectly? TIA!

[KrisD15 · Accepted solution]

You said you negated the 1099-MISC as illustrated in the answer above. 

Did you also then add that same amount in the Education Section as Scholarship income? You need to enter the amount of the 1099-MISC in the education section as scholarship not on W-2 or 1099.

"...return to the Education section and enter as Scholarship Income:

Enter under
Deductions & Credits
Education
Expenses and Scholarships (Form 1098-T)
Continue through the interview and enter the 1098-T if you have one, if not just ignore the screens asking about Form 1098-T and continue until you get to the "Did you Receive a Scholarship or Grant in (XXXX Tax Year)"

The program will say "Don't enter scholarships already reported on Form 1099" but in your situation, since you zeroed-out the 1099-MISC, ignore that warning and enter the amount."

When finished, you should see the 1099-MISC and the negative entry, BOTH,  on Schedule 1 Line 8z and the amount of the scholarship on Form 1098-T plus the amount of the 1099-MISC on Schedule 1 line 8r.

If the amount of scholarship from your Form 1098-T is working properly, delete Form 1099-MISC and reenter. If the program is still insisting the 1099-MISC is self-employment, it's how you're answering the questions when entering the 1099-MISC that is causing the issue. 

You can first try to edit the 1099-MISC. If that doesn't work, delete it and re-enter.

Please pay attention to the questions in that interview.

Enter the 1099-MISC as it was reported, Type "Scholarship" in for the description, Select "None of these apply" for uncommon situations, 

"NO" not like main job, 

Only got it in 2024,  

"NO" no intent to earn money, 

DONE

 These are TurboTax questions, not IRS questions. These need to be the answers to let TurboTax know it is not Self-Employment.

HERE is how to delete the form. 

So if the 1098-T is working fine and the scholarship income from that is flowing to schedule 1 line 8r you need to do THREE things with the 1099-MISC

1. Enter it and answer the questions as posted above

2. Enter the same amount as a negative number under "other income"

3. Enter the same amount as a positive number as "scholarship not on W-2 or 1099" in the Education section (the same section you entered the 1098-T)

At the end you will have 1099-MISC on Schedule 1 line 8z

Negative on Schedule 1 line 8z

Total scholarship amount on Schedule 1 line 8r

Scholarship on Schedule 1 line 8r can be used for IRA contribution 

[jmk518]

Thank you, this appeared to work but I was thrown off by the question asking what portion of the scholarship income was not designated for expenses and I entered the full 1099-misc amount, which made it be treated as non-taxable. I really hope I can remember this next year.

[jmk518]

I stand corrected. It is still says my Roth IRA contribution is an excess contribution. Schedule 1 lines 8r and 8z are correct, and the 1040 shows correct AGI and that is in excess of my Roth contribution by a large margin. It still says Roth contributions above my W-2 income are excess contributions.

[DaveF1006]

To clarify, what type of income was reported on 8R?