I received a 1099-MISC form for a scholarship. Do I need to report this? I was under the impression that scholarship money is generally not taxable.

[TaxGuyBill]

The referenced thread is talking about Hobby expenses (which can't be done that way), but the procedure is presumably correct to explain how to enter a 1099-MISC with box 3 and then canceling it out again (which is correct for this circumstance).

[Carl]

Found it!

• Reporting 1099-MISC (box 3 or box 7) that is not self-employment income

Under the Wages & Income tab (or Personal Income tab) scroll down to Other Common Income and elect to start/update Income from form 1099-MISC. Then click YES to indicate you have a 1099-MISC.

Enter the 1099-MISC exactly as printed, and then Continue.

Enter the reason you got this money – be it scholarship, bonus, streaking butt naked across the 50 yard line of the super bowl, whatever. Then continue.

Select None of these apply, then Continue.

Select No, it didn’t involve work….. and Continue.

Select ONLY the tax year for which this specific 1099-MISC was issued. Do not select the year that you received the 1099. Select the year for which the 1099-MISC was issued. Select no other year. Then Continue.

Select No, it didn’t involve an intent to earn money, then Continue.

Select NO, then Continue.

Click the DONE button, and that does it.

[Opus 17]

@nmolinajr because the scholarship was reported on a 1099-MISC, you need to report it in three places.

1. Add it as other income from a 1099-MISC as described in Carl's answer.  Make sure you indicate box 3, and answer all the work-related questions "no" (not an intent to earn money, not for work, etc.)

2. Go back to the Other Income section and add it under "other reportable income" at the very bottom of the income section.  Call it something like "scholarship offset" and use a negative number.  This will cancel out the taxability of the income.

3. In the Education section of the Deductions and Credits page, you need to enter your 1098-T for tuition expenses.  Keep going in that section and you will be asked about scholarships.  Enter the scholarship again.  This is necessary because you can't get a credit for expenses that were paid with tuition, so the program takes your tuition and subtracts the scholarship to see how much is left over for the tuition credits.

Note this only applies if the scholarship is less than your qualified expenses for tuition and required supplies.  If your scholarship is more than tuition, and you used some of it for room and board or other expenses, then that part is taxable and we have to make some different adjustments.  Let us know if you need to do that.

[Carl]

Actually, you just report it as income per my above so it's not treated like business income. Then it's taxability will be offset by the qualified education expenses claimed in the education section. Remember, a scholarship is "initially" reported as taxable income, with it's taxability offset by the qualified education expenses it's used for. Then anything left over is automatically reported on line 21 by the program as taxable income with the annotation of "SCH" next to it.

[Opus 17]

I don;t think so, I just tested it.  If I enter a 1099-MISC for $5000, a 1098-T for $14,000, and put the scholarship after the 1098, it does NOT back out the 1099-MISC from line 21.  The problem is that a 1099-MISC can be for anything and turbotax does not have a way to link up the 1099-MISC in the income section to the scholarship in the education section.  The 1099-MISC could be for a line dancing contest. Plus the fact that the IRS instructions say that a 1099-MISC should NOT be used for scholarships, so why should the program expect to link them?

And actually, I don't like the idea of reporting it at all as income.  The 1099-MISC instructions specifically say that the form is not to be used for scholarships.  I would advise the taxpayer to go back to the payer and point this out to them in the instructions, and ask them to cancel the 1099-MISC with the IRS.  If that doesn't happen, I would almost rather leave it off the tax form entirely, rather than create an income entry with a phantom offset.  The IRS will send a CP2000, but the taxpayer can explain with the appropriate documents (tuition bills, letter of scholarship award from the payer, etc.)  I'm not sure why the majority of superusers think that reporting the 1099-MISC and then reporting a phantom negative offset won't look questionable to the IRS.

[Carl]

I just tested it, and have discovered we didn't test the same way. Apparently, (I think) you are assuming the 1099-MISC monies are reported on the 1098-T in the scholarships box 5. If so, your method is correct.
If the monies reported on the 1099-MISC are not included in box 5 of the 1098-T, then my method is correct.
However, leaving the 1099-MISC off the tax return entirely is a bad decision. It will eventually result in the hassles of having to deal with a CP-2000 that might not be received until 2 or more years later. Having to dig through paperwork from a few years ago, one can easily get confused or could possibly even have forgotten the details surrounding it, and end up paying taxes, fines and penalties when if done right the first time, would never occur.

[Opus 17]

No, I used a 1099 from a third party payer not on the 1098.  Such as if the scholarship was awarded by a civic group, contest, or foundation.  Enter as income, also enter as a scholarship not on a 1098.  Does not seem to be accounted for.  

I assume that any internal college scholarship would simply be taken off the tuition bill and not 1099ed.  I'm guessing that came from a private payer.  And I can't make that work the way you suggest.

[Carl]

One must be careful which prior post they reference. some of them are 2 years old, and t hings changed in TT 2015. For example, in TT 2015 in the education section, you are asked if any of the scholarship money was reported on a 1099-MISC. This question is not asked in prior year's versions. So referencing a question/answer from the 2014 tax season and earlier is not advised.

[JamesFan]

Any follow up on this issue? I have exactly the same issue this year. My am working towards a grad degree and got a $3000 scholarship from school, my tuition fee is above $10k. The school issued me a 1099-MISC, my education credits is almost wiped by this $3000 income. I read a few online posts and many believe that the school didn't follow 1099-MISC instruction and disreported scholarship s 1099-MISC,
“Scholarships. Do not use Form 1099-MISC to report scholarship or fellowship grants. Scholarship or fellowship grants that are taxable to the recipient because they are paid for teaching, research, or other services as a condition for receiving the grant are considered wages and must be reported on Form W-2. Other taxable scholarship or fellowship payments (to a degree or nondegree candidate) do not have to be reported by you to the IRS on any form.”
and suggest this:
If you receive a 1099-MISC that reports your fellowship income, you should report it as fellowship/scholarship income rather than as 1099-MISC “other” income.
This is to say ignore the 1099-MISC and reported it as scholarship in the education section, which is similar to Opus answer. IRS know what you are doing, and will accept that it's the school misreported 1099-MISC.

FYI:
<a rel="nofollow" target="_blank" href="http://pfforphds.com/what-is-a-1099-misc/">http://pfforphds.com/what-is-a-1099-misc/</a>
Even these 2 links below this page has totally different opinions:
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3079277">https://ttlc.intuit.com/questions/3079277</a>
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4003621">https://ttlc.intuit.com/questions/4003621</a>

[pnut1]

I did a internship for the corporation for national and community service. They sent me a 1099-misc for other income which was payed to my college tuition. Is this taxable

[pnut1]

I did a internship for the corporation for national and community service. They sent me a 1099-misc for other income which was payed to my college tuition. Is this taxable

[Carl]

Just the fact you got a tax reporting document for that money means itt's "reportable". When you enter it, it's treated as taxable income "initially". But that taxability will be offset by the "qualified" education expenses it paid for.