I received a 1099-MISC form through the union at my work for an education stipend. This was not for a small business or private business of my own. However, TurboTax automatically files this as a small business. How do I avoid this?
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Please see Tax Expert TomK's advice here/below:
There will be a few steps to follow to report your stipend correctly because of the form 1099-MISC. First, you would have to report 1099-MISC and make adjustments for the IRS matching purposes. Then, you would report the stipend correctly using steps below.
REPORT 1099-MISC
IF box 3 reports your stipend, report the form as follows:
And then make an adjustment using the steps below:
If box 7 reports the stipend, you would have to report it as self-employed income, then enter the same amount as your "business" expense. This will ensure that form 1099-MISC is reported for matching purposes, but the amount is not taxable as self-employment income.
Go to:
1. Federal Taxes
2. Wages and Income
3. Self-Employment, Select Income and Expenses - follow the interview questions; you would report the stipend as if you own a business; once general questions are answered, you would enter the stipend as an expense (you can create your own description). The end result: form 1099-MISC is reported, but the income is not self-employment income--because it shouldn’t be.
I did exactly what you said and turbo tax is still making me report this as my own business in schedule c. How do I get around this?
If the amount was reported in box 7 of your Form 1099-MISC, then it will be reported on Schedule C (as mentioned in the answer above). There is not an option to get around it unless you want to hear from the IRS for not reporting the Form 1099-MISC.
In order to avoid paying self-employment tax or income tax on the amount you need to enter a business expense that is equal to the income amount reported. Go to the miscellaneous expense section and enter 'adjustment for stipend' as the description and the box 7 amount as the amount.
The end result is that you will not get a letter from the IRS for not reporting the information on the Form 1099-MISC, but you are not paying taxes on the amount either.
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