Internship stipend

[thomas_callahan]

My child got a small stipend (grant?) from her college to enable her to do an unpaid summer internship. It's through a program funded by the school so that their students can do afford to do unpaid internships who otherwise would need the income from a paid summer job. There were requirements around the types of internships she was allowed to do, she had to get approval first and give a presentation write a paper on her experience afterwards.

She also has a small amount (few hundred $) of W2 income from the school. She does get grants from the school for tuition, too, but is not doing work study or anything, this extra income is just regular W2 income not not related to any financial aid. No federal taxes were withheld from that (SS and Medicare were).

Her total income from both sources was less than 1/3 of the current filing requirement. She is claimed as a dependent on my taxes. I'm helping her do her own taxes.

The school provided a W2 for the other work, but what they say about the internship money is that "it should be reported to the IRS as income, but we are not obligated to nor will we provide any documentation or tax advice".

I cannot find anywhere in TurboTax to put this, other than as self-employment income with no documentation which triggers self-employment tax and requires upgrading to a paid version of TurboTax. This doesn't feel like "self-employment" income to me.

I can understand the self-employment tax I guess, as nothing was withheld from this stipend at all, but it seems ridiculous that someone earning this small an amount of money should have to switch to the paid products because of this. Am I doing something wrong here? Is this supposed to be reported somewhere else that wouldn't trigger the need to upgrade (and preferably not self-employment tax either)? Is the school's vague statement hinting that this doesn't actually have to be reported?

If it truly is self-employment income then she has to file, but if not since she's well under the filing requirement should she just not file at all this year and avoid this issue altogether?

[ReneV4]

No. You should not report this a self-employment income because it is not.

If her total earnings were under the threshold of $15,750, she does not have to file, so that may be an option.

However, it may be beneficial for her to file, even if under that amount, for a potential refund, and to create a tax record. Therefore, here is another option to consider.

Instead, she can input this as a taxable scholarship by doing the following:

1. Go to Deductions & Credits in the Federal section
2. Select Education and click the drop-down arrow
3. Select Expenses and Scholarships (Form 1098-T)
4. "Did _ have any of these common situations in 2025?", select Received a scholarship, frant or other aid, Continue
5. "Did_ get a 1098-T?", select No, then Continue
6. Select "_qualifies for an exception", then Continue
7. Enter the school info, leaving the payments for tuition blank, then Continue past the school info until you reach, Add any other financial aid
8. Enter the amount of the funds received in the Other scholarships, grants, or fellowships box, Continue
9. Check the "_ used it to pay for room and board" box when you reach, "Did _ have any of these situations for their scholarship or grant?"
10. Enter the amount received as the amount used for room and board, then Continue

Following these steps ensures the stipend is correctly reported as taxable scholarship income used for room and board, which are considered non-qualified expenses. This will satisfy the IRS requirement to include it in earned income without incorrectly triggering self-employment tax.