How to report 1042-S Form (Income Code 16 and 20)

[dontknowtaxes2024]

I'm a resident alien (From China) trying to understand how to report my two (2) 1042-S Forms with Income Code 16 and Income Code 20. Per the IRS website the income codes are described as:

• Code 16: Scholarship or fellowship grants
  
  • Per the US-China treaty, be used to exemption of a portion of my scholarships from taxes
• Code 20: Compensation during study and training
  • This is tax-free income that is not included in my W2

To file my Code 16 1042-S, I followed the instructions:

1. In TurboTax under Federal, click Wages and Income

2. Click  Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the treaty and the adjustment as a negative number

I'm not so sure how to to file my Code 20, as the income was not included in my W2. Do I need to follow the same steps at what I did for Code 16 but enter in the income received from my Code 20 1042-S. I notice as I do this, my federal refund goes up. From my understand the income received from my Code 20 1042-S is tax free. Is this right? Or should just not file anything for my Code 20 as it's non-taxable income?

Also, do I need to file a Form 8833? Also would I need to file multiple 8833 forms per 1042-S Form? Per the IRS website, you are exempt from filing the form if:

"Exceptions

The payee does not have to file Form 8833 for any of the following situations:

2. The payee can claim a treaty exemption that reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants."

[AmyC]

Your code 16 can be entered as you described or the same as code 20.

Your code 20 is almost the same.

I don't believe you need to file the 8333 but please read the exceptions below to be certain.

First enter the income:
1. go to the federal income section
2. scroll to the bottom
3. Miscellaneous Income, 1099-A, 1099-C, Start
4. Other income not already reported on a W2 or 1099, Start
5. Other wages? Yes
6. Household employee? Continue
7. Sick pay, continue, Medicaid, continue
8. Other Earned Income? Select Yes, continue
9. Source of income? Select Other
10. Enter description - Scholarship, enter your taxable amount
11. Continue

Subtract 
1. Miscellaneous Income, 1099-A, 1099-C, Start
2. Scroll to the bottom
3. Other reportable income, Start
4. Other taxable income?
5. Select YES
6. Description Treaty
7. Amount, enter your negative amount
8. continue

Claiming Tax Treaty Benefits

The payee does not have to file Form 8833 for any of the following situations:

1. The payee can claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate.
2. The payee can claim a treaty exemption that reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants.
3. The payee can claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement.
4. The payee is a partner in a partnership, or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return.
5. The payments or items of income that are otherwise required to be disclosed total no more than $10,000.