How do I report a stipend I received for an internship last summer? I received a 1099-NEC.

[CJonikes]

Whenever I put the information in the 1099-NEC section it tries to count me as a self employee or a contractor, but up to my understanding, An internship is a non-continuous form of income.

[Opus 17]

It can still be considered self-employment even if it is a short-term service.  The important question is whether this was connected to a college degree program, and was it arranged by the school and is a mandatory degree requirement.  In that case, it is probably treatable as a fellowship for education, meaning it is taxable "miscellaneous" or other income, but not subject to self-employment tax.  

If not a mandatory part of your education, then it still might not be considered self-employment.  I can't find the specific document, but I recall something to the effect that, if this was a training position, and having you there was actually more of a burden to the company than a benefit, it can be considered other income instead of business income.

Lastly, if it was never your intent to earn a profit, and this work is not expected to lead to a regular job and was something you did for your education, you can call this hobby or other income, but this is the weakest of the 3 arguments.  Because the income was reported on a 1099-NEC, the IRS will assume it was self-employment, and if you report it as "other" income, you will get an automatic letter asking you to pay self-employment tax or provide more details about why this is not self-employment.

To report as a business (self-employment, independent contractor) you enter as a 1099-NEC, fill out a schedule C for self-employment.  You may be able to deduct business related expenses.  You pay self-employment tax on the net profit, and you may pay income tax depending on your other income and deductions.  To report as miscellaneous income, enter the 1099-NEC but answer all the test questions as no (not for profit, not like my regular job, will not do again, etc.).  But be mindful that if you don't report this as self-employment, the IRS will probably ask you about it.

[CJonikes]

Thank you for your reply!

To provide more information about the question above, This is what I got. The internship was not required for my degree competition, and it was not done in school either. 

If I put the information into the 1099-NEC section and I did not get prompted the test questions I must answers as no. how could I go by doing that?

[CJonikes]

I'm still unable to see the questions that I must answer as no. 

Is there an specific way to access them to complete them the way you recommended?

[DawnC]

You get the questions Opus17 referred to when you enter a 1099-misc.   When you enter a 1099-nec, there is a screen that you can mark that the income is not self-employment.   Delete the 1099 you previously entered (and the Schedule C if necessary) and then re-enter it.   The follow-up screen to mark the box look like the screenshot below.   As mentioned above, the IRS considers this self-employment; you may receive an inquiry for not filing the self-employment Schedule C.   

[CR_Chicago]

I received a 1099-MISC for a research position at my university for the summer. I also worked for the university in a different capacity and received a W2 (during the school year). I don't want to claim the stipend as self employment income because of the tax implication.  Can I use the example above that was not common. Super confusing that I can make $5000 and have to pay $700+ to the federal government and another $300 to two states (where I worked and where I reside). Any suggestions appreciated

[Opus 17]

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@CR_Chicago wrote:

I received a 1099-MISC for a research position at my university for the summer. I also worked for the university in a different capacity and received a W2 (during the school year). I don't want to claim the stipend as self employment income because of the tax implication.  Can I use the example above that was not common. Super confusing that I can make $5000 and have to pay $700+ to the federal government and another $300 to two states (where I worked and where I reside). Any suggestions appreciated

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There is a difference between an internship with a private company and an internship with your school.  Almost always, an internship with your school is considered part of your education, and while the income is still taxable, it is not considered work, so it is not self-employment.  When you enter the 1099-MISC, apparently they removed the check box for research stipend (I think there used to be one) so you can categorize it as hobby income, it works out the same.  You should not be paying "self-employment tax", but you also can't deduct any related expenses.  

Separately, you are running into 2 other situations.

With your state, if you are a permanent resident of state A but you worked in state B (where the school is located), you need to file a non-resident return in state B, and a resident return in state A.  Your non-resident return for state B only reports income earned in state B, while your resident return for state A reports all your world-wide income.  (If you had income not from state B, like investments or a job from your home state, be sure to allocate your income sources correctly, you have to do this manually.)  Your home state should give you a credit for taxes paid to the other state, which should reduce or eliminate double-taxation, depending on the state.  Make sure you prepare the non-resident return first so the credit flows correctly to your home state. 

Then lastly, because you are under age 24 and at least one parent is still alive, you are subject to the "kiddie tax".  This was originally designed to prevent parents from having their investment income taxed at a lower rate by putting it in their children's names.  Because you have unearned income (income not from working -- i.e. the research stipend), some of your income is taxed at a higher than normal rate, and your standard deduction is lower than normal.  (If you are not under age 24, then the $700 federal probably represents self-employment tax, which should go away when you change the 1099 to hobby income.  I don't know why your state taxes would be so high, it depends on the state.  If you are a dependent of your parents, you may get less of a personal deduction in some states.)

https://www.irs.gov/taxtopics/tc553

Once you fix the self-employment issue and the 2-state issue, your tax should come down.