Question

How do I enter college stipend for junior practicum that is reported on 1099-NEC?

Forum|Forum|3 years ago
February 26, 2023
2 replies
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My daughter received a stipend to support her junior practicum internship experience. I believe she received credit for the internship, but I'm checking to confirm that. She received a 1099-NET for the stipend amount. I'm trying to enter it in the other income portion of her taxes, but TurboTax seems to be treating it as self-employment income ... is there some other way to enter it as a college-related stipend? Thanks.

TurboTax Deluxe Online

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DavidD66

No, even though it may have been called "stipend" and is school related, it must be reported as self-employment income on Schedule C. She can deduct any expenses that she incurred while working to earn the "stipend".

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ellyragoneAuthor

Thanks, David. This prior post (https://ttlc.intuit.com/community/college-education/discussion/if-i-received-a-1099-nec-for-a-ph-d-stipend-scholarship-for-doing-research-should-i-file-form-8919/00/2363570?lightbox-message-images-2363570=24007i99DC400A2324629C - and some others) suggest otherwise ... my daughter received academic credit for the practicum, so it was academic work rather than paid employment, no? I've added it to her education grants and scholarships section (beyond what was reported on her 1098-T), per the other thread ... I'd love folks' thoughts. @Opus 17 , who wrote the other thread, do you have any thoughts? Thanks, all!

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DavidD66

If the stipend was part of a scholarship or fellowship and was for living expenses (room & board) it would be treated as a taxable scholarship. However, it was by reported on Form 1099-NEC, therefor the issuer/payer has classified the payment as being for services rendered/work performed, which is reported on Schedule C.

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ellyragoneAuthor

Thanks. Prior posts suggest the switch to form NEC hasn't been smooth - that there used to be a fellowship exception option when the MISC was used for these, and that adding it to the education scholarships and grants under deductions gets the stipend properly treated as taxable academic fellowship money. @Opus 17 , am I misunderstanding your other posts?

And just to confirm, if it is taxable academic fellowship money, would it only be taxable IF my daughter earned total income above the $12,950 filing threshold? Because right now, after adding this stipend to her scholarships and grants, beyond what's in her 1098T, TurboTax is showing no taxes due, and I want to be sure I'm not missing anything. Her total income, counting this stipend, is well below this threshold, so I think that's why, but I'd like to be sure. Thanks so much!

The problem is that the payer does not always use the correct rules or know the correct tax laws. I would not rely on the fact that a 1099 NEC was issued to be definitive proof that the stipend was considered compensation for employment, rather than an educational fellowship. You will have to determine based on your own facts and circumstances, whether this was “education” or “work.”

Someone else who has expertise in this area is @Hal_Al

I believe that in the 1099 interview, there should be a list of special circumstances, and one of the items on the list is educational fellowship. That should render the income taxable as “other income“ rather than as self-employment income. You can also bypass entering the 1099 NEC completely and walk through the interview for educational expenses. You will start by indicating that you do not have a 1098T, but then you can enter a stipend or fellowship “not reported on a 1098.”

if you don’t report the income as self-employment, it is always possible that the IRS will send a letter, asking the tax payer to include a schedule SE, and pay the self-employment tax. The taxpayer would reply with a description of the facts and circumstances that make it educational, along with any useful proof, such as emails, or a course record, or a course transcript that proves the activity was educational.