Income Less than $10K, 1099-Mix Box 3 and Tax Pay

[hemenshah]

My child is a student at University.  In 2021 she did research at her school.  School send her 1099-Misc with Box 3 (other income) for the research stipend.  Do we still need to file Federal income tax return if her stipend and total income is less then $10K?  In most case, does she have to pay taxes on that income.  I have noted if you get W2 income, the taxes are usually fully refunded if less than $10K.  Why is this different if she is getting 1099-Misc Box 3.  I was expecting no income tax needs to be paid if income less than threshold amount.  She is my dependent on my income tax.

[JamesG1]

Perhaps.  The dependent filing requirement is different from other taxpayers.  You are able to prepare a dependent tax return in TurboTax to see whether income taxes are due.  If no tax return is necessary, you do not have to pay for the tax return.

Follow these directions to report research stipends as taxable income.

• Down the far left side, click Federal.
• Across the top, click Wages & Income.
• Under Your Income, find Less Common Income.  Click Show more.
• Under Miscellaneous Income, 1099-A, 1099-C, click Start.
• Click on Other income not already reported on a Form W-2 or Form 1099.
• Click Yes on Did you receive any other wages?
• Continue past Wages earned as a household employee.
• Continue past Sick or disability pay.
• Click Yes on Did you earn any other wages?
• Choose Other under Enter source of other earned income.
• Enter the income under the Any other Earned Income screen.

The dependent filing requirement is: 

• Unearned income was more than $1,100.
• Earned income was more than $12,550
• Gross income was more than the larger of:
•      $1,100, or
•      Earned income plus $350.

[Hal_Al · Accepted solution]

A research stipend can be reported as earned income. Technically, she does not need to file because she has less than $12,550 or earned income.  Unfortunately, income on a 1099-Misc is not considered as earned income. The filing requirement, for a dependent is only $1100 when she has unearned income.  The school should not have reported the income on a 1099-Misc.  So there is a chance you will hear from the IRS if she doesn't file.  You should be able to explain it away if that happens. 

But, to head that off, you may want to have her file a return.  Follow JamesG1's  instructions for entering and that will put the income on line 1 of form 1040, as earned income.   You may want to paper file so that you can  attach a copy of the 1099 and a statement explaining the circumstances (this is optional). You can't e-file, with attachments. 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.

[hemenshah]

So is Research Stipend suppose to be reported on W2?

[Hal_Al]

Yes, a stipend paid to a student, by his college, should be reported on a W-2 or as scholarship on form 10980-T. 

[hemenshah]

Thank you both for the answer!!