1099-Misc for internship stipend

[sam2022_]

I have a 1099-misc form with box 3 filled out. I am a college student and this stipend was for work done in an internship (but the internship was done outside of school). Where am I supposed to add this form? When I try adding it, it taxes me for social security and medicare, which I don't think is supposed to happen. Or it gets the kiddie tax, which I thought was only for unearned income.

[PattiF]

In TurboTax Online:

• Go to Other Common Income in the Income & Expenses section,
• Click Start at the 1099-MISC box
• Enter info from 1099-MISC,
• Describe the reason for this 1099-MISC, and Continue
• Does one of these uncommon situations apply?, Choose None of these apply and Continue
• Check that No, it didn't involve work like my main job
• How often did you get income for internship stipend, Choose I got it in 2021 and Continue
• Did the internship stipend pay involve an intent to earn money, Choose, No, it didn't …. And Continue

[sam2022_]

This makes it subject to the kiddie tax. Is that supposed to happen? Is a stipend considered unearned income, even if I received it after doing work for an internship?

[JamesG1]

IRS Form 8615 Instructions page 1 states:

Unearned Income 

For IRS Form 8615, “unearned income” includes all taxable income other than earned income. Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income (other than earned income) received as the beneficiary of a trust.

[snjrrrr]

I have the same question but with the following differences:

- I am a phd/ graduate student, not an a undergraduate student like the original commenter.

- I received a stipend to do research at another university in a different state over the summer as part of a grant funded exchange program. However, I was an intern, not a student or W2 employee of the out of state university. The university received grant money to pay me, but I didn't receive it directly. They sent me a 1099-MISC form for the stipend. 

question: Should I still select that the internship was not an attempt to earn income and that it is not similar to my other work?

[KrisD15]

Yes, you should still select that response since you are not really doing "work" or a side job, and you should not need to pay self-employment tax on a stipend or grant. 

One of the reasons the IRS resurrected Form 1099-NEC is to distinguish Self-Employment income (1099-NEC Non-Employee Compensation) which IS subject to Self-Employment (FICA) tax from everything else  reported on Form 1099-MISC. 

The IRS does not address this directly however;

Pub 970

“ certain non-tuition fellowship and stipend payments not reported to you on Form W-2 are treated as taxable compensation “…..

“These include amounts paid to you to aid you in the pursuit of graduate or postdoctoral study and included in your gross income under the rules discussed in this chapter. Taxable amounts not reported to you on Form W-2 are generally included in gross income as discussed later under Reporting Scholarships and Fellowship Grants.”…

“ Include any taxable amount not reported to you in box 1 of Form W-2 on Schedule 1 (Form 1040), line 8r.”

Schedule 1 line 8r is "Other Income" and not treated as Self-Employment. 

To get the income from the 1099-MISC to this line on your tax return, answer no to being like your work. 

[snjrrrr]

Thank you so much for this info!

Follow- up question: I live in a state without income tax, but since this stipend was for a 3 month internship in another state (HI), do I need to report it on a HI state tax return? If yes, as what kind of income in that context? thank you.

[PatriciaV]

Yes, you will need to report this income on a Hawaii State income tax return. Hawaii taxes all income earned within the State of Hawaii. Indicate that you had income in another state and TurboTax will help you complete the state tax return.

Did you live in Hawaii for more than 200 days during the internship? If so, you are considered a part-year resident of Hawaii. Otherwise, you are a non-resident. Either way, you will need to file Hawaii Form N-15 for nonresident individuals or individuals who are Hawaii residents for only part of the tax year. 

[dsw1234tax]

Similar situation with 1099-MISC stipend income for an internship. A portion of the stipend was to cover travel expenses. Does that impact the taxes due in any way?

[MonikaK1]

No, the funds are still taxable, similar to scholarship income that covers unqualified expenses such as travel, room, and board as distinguished from nontaxable scholarships that cover tuition.

If travel expenses are reimbursed following an accountable plan, such as many employers set up, then the reimbursement would not be taxable.

See IRS Topic 421 for more information.

[DAD66]

I know this is really old but any chance you got an answer? What did you wind up doing? making this income "unearned" not only subjects you to the kiddie tax but lowers the standard deduction and make filing mandatory even if total income is under the threshold. 

[AmyC]

To make the 1099-MISC income earned income there are two ways.

Option 1: enter it in the education section as a scholarship and claim it was used for room and board. Follow these steps:

1. Open to Federal Deductions & Credits.
2. Scroll to Education 
3. Start/Revisit next to Expenses and Scholarships (Form 1098-T).
4. Answer No to "Did you receive a 1098-T?" (unless you have one for tuition).
5. When asked if you "qualified for an exception," answer Yes.
6. Continue through the interview until you reach the screen: Did you receive a scholarship or grant in 2025?
7. Enter the amount in the box for Other Scholarships/Grants/Fellowships.
8. When asked if any was used for "Room and Board," answer Yes and enter the full amount.

Option 2: enter it as 1099-MISC income under Other Income. Follow these steps:

1. Open to federal income
2. Locate Other income
3. Select 1099-MISC
4. Enter your information
5.  You have to mark:

• no intent to earn money
• mark that the income is only for this tax year. Otherwise the program will think it is recurring income and a business.
• mark no to like main job

[Jakeado]

Thanks but there is a 1098 for actual (unrelated) scholarships and this wasn't work that occurred at a university so doesn't truly fir the definition of a scholarship. Secondly, the second way puts it in as unearned income, which then triggers the "kiddie tax" and lowers the standard deduction (for dependents) that also makes more tax due than there should be (income doesn't even fit the threshold for filing). 

After extensive research and calling Turbo Tax, it was decided the best way to do it is to put it under  less common income,  Misc Income and then unreported earned income which then goes to line 1h on the 1040;. income is still taxable, but as earned income. 

Do you disagree?