State taxes for 1099-Misc

[osk]

I am a college student who received a $5500 fellowship from a Virginia based non-profit organization called the American Association of Physicists in Medicine (AAPM), and received a 1099-Misc form from them. On the 1099-Misc, the $5500 was in box 7 (Nonemployee compensation).

However, all work for the fellowship was preformed in New York for Memorial Sloan Kettering Cancer Center (MSKCC). MSKCC is not related to AAPM and did not provide any of the money I received for the fellowship.

Do I have to file state taxes for the money received from this fellowship and if so do I file the taxes in VA or NY?

[Bsch4477]

Since the work was done in New York you would pay tax on that income there if you have a filing requirement.  The IRS considers you to be self employed for that income so you would be completing Sch C and will owe self employment tax on that income. 

[Opus 17]

First, where did you perform the fellowship, and what is your state of residence?

Second, what was the nature of the fellowship?  You obtained this through college and it was part of your educational experience?

Your state of residence is where you are domiciled, where you permanently lived in 2019.  It might be NY, or it might be your home state if you are a college student and still live at home over the summer (you are considered "temporarily" away from home in that case.)

If your official residence is not in New York state, did you live or work in NYS more than half the year? (183 or more days?)

You will owe income tax either where you performed the work (NY) or where your permanent home is, or both.  You won't owe VA tax if your only connection to VA is that is the headquarters of the organization that funded the fellowship. 

[Opus 17]

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@Bsch4477 wrote:

Since the work was done in New York you would pay tax on that income there if you have a filing requirement.  The IRS considers you to be self employed for that income so you would be completing Sch C and will owe self employment tax on that income. 

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Probably not self-employed if this was an educational fellowship, even though it was reported in box 7.  Needs follow up information.  

[osk]

My state of permanent residence is Michigan. I was only in NY for the fellowship during the summer (about 10 weeks). The fellowship was educational (it is called the "AAPM Summer Undergraduate Fellowship Program"), but I did not obtain it through my school, I got it through AAPM (mentioned above).

[osk]

@Opus 17 

I performed the fellowship in New York. My state of permanent residence is Michigan. 

I did not obtain the fellowship through my college. I obtained it through AAPM (mentioned above), but it was an educational experience. The full name of the fellowship is the "AAPM Summer Undergraduate Fellowship" (its specifically for undergraduate students to gain experience in the field).

I only lived in NY for 10 weeks as the fellowship was a summer program.

[Opus 17]

In TurboTax, you start by preparing your federal tax return. You list all your worldwide income, no matter where it was earned.  The internship is not self-employment income, because it was educational and it is exempt from self-employment tax. Because it was entered in box 7, TurboTax will try to make it self-employment income. I believe there is a checkbox on the screen after you enter the 1099 information that says something like, this was a “scholarship or Fellowship”.  You should also answer the 1099 test questions all as no; this was not like your regular job, you were not trying to earn a profit, you will not be doing similar work next year.  (because this is an educational fellowship, it is not considered “income earned from work“ and it is not considered “profit“, even though the money was nice to have.)

Then, you need a New York State nonresident return. You would indicate in TurboTax that you are a permanent resident of Michigan and that you were working temporarily in New York State for 10 weeks (less than 182 days or less than half the year).  On the New York State nonresident tax return, you will only owe tax on income that was actually earned in New York State. If you were living or working within the borders of New York City, you will also owe city income tax.

Then, you need a Michigan full year resident tax return, on which you will pay income tax on all your worldwide income, including the income earned in New York.  Michigan will give you a credit for the tax that you paid in New York State, so you mostly don’t get double taxed on the same money.  The credit will flow automatically in TurboTax as long as you prepare the New York State return first and the Michigan state return last.

If this was your only income for the year, you may owe some New York State tax, because I don’t know what the standard deduction is for non-residents without looking it up. But you are probably not going to pay federal or Michigan state tax. If you had other income, then of course your tax would be determined by your overall income and deductions.

If your total income for the year is less than $36,000, you should use the IRS free file version of TurboTax rather than the standard version. To file multiple state tax returns using TurboTax online will probably cost over $100. The IRS free file version is free completely free and includes forms and situations that are not included in the free version of TurboTax. It is a separate website and you may need to make a new account and start over.

https://freefile.intuit.com