I have a postdoctoral fellowship and received a 1099-Misc, but it should not be subjected to FICA as self-employed income, how do I enter this into TurboTax?

[iferrinoconnell]

I receive a postdoctoral fellowship and a 1099-Misc, but it should be treated as a taxable fellowship and exempt from self-employment taxation. Yet, if I report it through the 1099-Misc in turbotax they will only recognize it as self-employed income and tax it as such. Should I instead report it through the other income option?

[ToddL]

Was the income on the 1099-MISC reported in Box 7? Did you provide any services as a condition of the fellowship (Teaching assistant, research assistant)? Did you get a Form 1098-T?

[iferrinoconnell]

The income was reported in Box 3, I did not receive a form 1098-T, and I did not provide any services as a condition of the fellowship. However, my income was paid through my employer, I receive health benefits from my employer, and I am definitely not a contractor or self-employed.

[ToddL]

Got it. Will post an answer in a few moments

[ToddL]

You will enter the amount of the fellowship in the Education section of Deductions and Credits - the Expenses and Scholarship (Form 1098-T) interview. If you have entered the 1099-MISC, delete it. See: How to delete a form

How To Enter Taxable Education Assistance

To claim taxable income from a scholarship or fellowship, here are the steps that you should follow:

1. Start or sign into TurboTax.

2. Complete the Personal Info section.

3. Complete the Wages & Income section if needed. Note: you will not enter your income from a scholarship or other education assistance here.

4. After the Wages & Income section, continue until you’re asked how you’d like to go through Deductions and Credits. Answer Explore on My Own.

5. Select Start or Update for Education Expenses and Scholarships.

6. Follow the instructions on the screens and answer any applicable questions. You will eventually get to the "Scholarships/Grants (for all schools); TurboTax will then calculate the amount is considered income.

[iferrinoconnell]

Thank you very much, this helps a lot!

[ToddL]

Some of the screens are confusing. If you run into one, let me know with a "Comment"

[matthew-r-clay]

I don't know that this answer is correct. Postdoctoral fellows are not students. They commonly receive 1099-MISC forms from their institutions, but should NOT be subjected to FICA or self-employment tax (there is conflicting case ruling on these situations, but the general consensus is that postdocs shouldn't pay self-employment tax). I am also confused about how to properly answer my turbotax questions as I am in a similar situation. I had federal taxes deducted from my wages and have a 1099-MISC. Help from any others would be appreciated.

[ToddL]

See below from National PostDoctoral Organization website.
Bottomline - Like many tax issues,"it depends". Two significant factors come into play - which box the 1099-MISC uses to report the payment and the institution's position. I did a web-search and the first institution I found took the position that payments to post-doctoral students were subject to FICA taxes. I can tell you that the institutions don't want to pay the "employer's share" of FICA taxes because it is an additional expense to them.

FICA and Fellowships
For fellowships paid through the institution, there is some variation on whether the institution should withhold federal employment taxes: social security and medicare taxes (FICA) and unemployment tax (FUTA). A 2005 IRS ruling implies that all postdoc income be subject to these taxes, including postdoc fellowship income; however certain fellowships and traineeships, in particular the NIH National Research Service Award (NRSA), are not because the research conducted by these postdocs is considered non-compensatory (i.e. the stipend is more like a grant than a wage paid for services). Given the initial controversy (and confusion) over these determinations (see articles below), the policies governing those supported on fellowships have been determined on a case-by-case basis by the institution’s legal counsel. Due to these variations, postdocs should check with their own institution’s decision.  Initial ScienceCareers.org article (inaccurately) describing the new IRS regulation and its implications:“A Taxing Question on Postdoc Pay: New IRS Regulation Demands Deductions from All Postdocs” by Beryl Lieff Benderly Alerted by tax attorney Bertrand Harding, Jr., that this regulation should not apply to NRSA fellows, ScienceCareers.org later received clarification of this fact from the IRS. A description of this clarification is included in the following articles:

“NRSA Fellows May Be Eligible for Substantial Tax Refunds: Background” by Geoff Davis

“NRSA Fellows May Be Eligible for Substantial Tax Refunds” by Bertrand Harding, Jr.
 
Self-Employment Tax
It can be a complicated question whether postdocs on fellowships are self-employed and are thus required to pay self-employment tax. Most IRS publications for the average tax payer suggest that if you receive a 1099-MISC form you should be paying self-employment tax. However, being a postdoc is a bit different than being an independent contractor. There are several tax court cases that deal specifically with postdocs and fellowships, primarily Spiegelman v. Commissioner of Internal Revenue (1994, 102 T.C. 394), which says that postdocs supported on fellowships are not self-employed. The crux of most of these arguments hinges on whether or not there is a quid pro quo or employer-employee relationship between postdoc and institution, and typically postdoc fellows are not required to render services to their institution in exchange for their stipend. However, as with paying FICA, this issue can be complicated. The unofficial rule of thumb is that if your salary shows up in Box 7 for “Non-employee compensation” (as opposed to Box 3: “Other income”) there is a higher chance that the IRS will scrutinize your tax return more carefully, expecting you to have paid self-employment tax. Thus, if you are not sure, it is highly advised that you talk to a tax professional.

[ToddL]

<a rel="nofollow" target="_blank" href="http://www.nationalpostdoc.org/?TaxIssues">http://www.nationalpostdoc.org/?TaxIssues</a>

[vandusn]

I believe this is the correct way to report my postdoctoral fellowship income, but the screens asking about what school I go to are confusing. Does being a fellow count as being a student in this case?

[ARJohnson]

I am running into this issue right now and would love some guidance on how to handle this in the 2019 filing software.

[KrisD15]

In order to get the fellowship reported on the 1040 line 1 with SCH written before the amount, it needs to be entered in the Education Section of the Deductions & credits section. (Expenses and Scholarships)

If it was reported on a 1099-misc, it could also be entered in the "Other Income" section below Wages & Income" (BELOW SELF-EMPLOMENT 1099-misc). It will be listed on line 7a.

Ether way you enter it, it will be treated the same way, taxable as income but not self-employment. 

If reported on a 1099-MISC, I prefer entering as Other Income  since the 1099-misc is then reported and the IRS can match it. 

Click Federal

Click Wages & Income

Click “See All Income” if needed

Scroll down (PAST SELF-EMPLOYMENT) to “Other Common Income”

Click “Show more”

Scroll down to “Form 1099-MISC”

Click Start

Enter the 1099-MISC and Continue

On the “Describe the reason for this 1099-MISC” screen enter something like “Fellowship” and Continue

Select “None of these apply” and Continue

Select “No, it didn’t involve work like main job” and continue through the interview selecting the appropriate answers for a one-time payment. 

The amount from the 1099-MISC will be reported as Other income on the 1040 line 7a, not as Self-employment

[saltedcheesetea]

I have the same question and when I try to report the fellowship amount (reported on a 1099-misc) under the "other income" section as advised, it does not recognize the amount as contributable to a Roth IRA. Is there another way to populate the "other income" line while still having the amount contributable to a Roth? 

Thanks so much!

[MarilynG1]

If entered as Miscellaneous Income, 1099-Misc income would count as income toward the Earned Income Credit, but not for Roth contributions.

This link has more discussion on Earned Income for IRA Contributions.

You will pay self-employment tax, but you may be eligible for an Education Credit if you have Eligible Education Expenses to claim.

You may also get a tax deduction by contributing to a Traditional IRA rather than a Roth IRA.

Click this link for more info on Deductions for IRA Contributions.