I received an Art Grant from a non-profit and it is not supposed to be taxable. They reported it on a 1099-MISC. Not sure what to do.

[gschigschiffman]

The Art Grant I received was reported by the non-profit charitable organization on a 1099-MISC box 7 Non-Employee Income. Per the IRS website it's not taxable:

https://www.irs.gov/charities-non-profits/private-foundations/grants-to-individuals

"Grants to individuals for travel, study, or other similar purposes (including loans made for charitable purposes, and program-related investments) are taxable expenditures, unless the following conditions are met: ... It is shown to the satisfaction of the Service that one of the following requirements is met-- ... c. The grant's purpose is to achieve a specific objective, produce a report or similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or similar capacity, skill or talent of the grantee."

What form do I file to tell the IRS it's not taxable?

[Hal_Al · Accepted solution]

If you received an erroneous 1099-Misc, You have several choices:

1. Ideally, you get a corrected 1099-misc from the payer

2. Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.

3. Report the Income on schedule C and take a deduction under other expenses, call it something like "nominee recipient adjustment"

4. Report the income as misc line 21 income (enter in TurboTax at the 1099-Misc screen) .  Then enter a line 21 deduction, for the same amount.  In TurboTax (TT), enter at:
- Federal Taxes tab
 - Wages & Income
- “I’ll choose what I work on” Button
Scroll down to:
-Less Common Income
      -Misc Income, 1099-A, 1099-C
       - On the next screen, choose – Other reportable income - Enter the number with a minus sign (-) in front. Briefly explain at description.

5. Do nothing and hope you can explain it away when & if the IRS contacts you

The fact that the organization issued a 1099-Misc probably indicates that they don't think you  meet the requirements for this income to be tax exempt. There's a good chance you may have to prove it to the IRS, later ("satisfaction of the Service")

[mguzman]

The key phrase on the IRS page that you cited is "under a procedure approved in advance." If the granting agency did not submit a request to the IRS to have their grant approved as non-taxable, it is indeed taxable. Applying for the grant to be non taxable is optional; non-profits are not required to do so.

[mark-makuch]

I think this entire thread as well as the answer are based on a falsehood - the question has a flaw which makes any answer to it flawed as well and that should have been noticed before advice was slung around.   The citation contained in the question is not from IRS literature on the taxation of grants to the recipient, it's from IRS literature on whether the payment of the grant BY the foundation is subject to an excise tax.  It's irrelevant to your situation.  Your grant is like other scholarships and fellowships - it's probably not taxable if it's going to tuition and fees at a proper college.   If you're getting six months to walk around with a red rubber glove on your head and journal about being a chicken or whatever it's taxable - that's why they gave you the 1099.

[T-Dog410]

Where do I apply for this grant? And is the red rubber glove deductible if I buy it to meet the grant requirement?

[Vincent-DeBacco]

Only if the chicken suit is supplied by the IRS.

[VolvoGirl]

FYI - This is a new forum layout. Some posts that have June 2019 dates are really older posts from the old forum that got moved over. So they might be for prior years and not current info. When they migrated over the dates got changed to June 2019. And the screen shots got deleted. 

[workingartist]

I know this is a reply to an old answer, but I want to second your post. I made the same mistake as the OP when I received a grant from a non-profit. But more research showed the IRS directive is for the granting organization, not for the individual. I hope the OP paid taxes on the award.