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March 29, 2020
Question

My daughter age 18 got a 1099-misc (box 7) $1,000 college scholarship. She has no other income. How do I input her 1099 on my (parent) tax return which has the 1098-T.

  • March 29, 2020
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Hal_Al
Employee
March 29, 2020

Scholarships are not reported on a 1099-Misc, particularly in box 7. Box 3 of a 1099-Misc would be more appropriate, but still technically incorrect.

 

What were the circumstances of her getting this "scholarship" and 1099-misc?

 

The IRS considers anything in box 7 of 1099-MISC to be self employment income and subject  self employment tax (social security & Medicare), in addition to income tax.  If you try reporting box 7 income as anything else, you chances of hearing from the IRS are high.

 

It cannot go on your return. If it goes anywhere, it goes on her return. 

Hal_Al
Employee
March 29, 2020

It cannot go on your return. If it goes anywhere, it goes on her return. 

 

If you received an erroneous 1099-Misc, You have several choices:

  1. Ideally, you get a corrected 1099-misc from the payer
  2. Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
  3. Report the Income on schedule C and take a deduction under other expenses, call it something like "nominee recipient adjustment"
  4. Report the income as misc line 8, Schedule 1 income (enter in TurboTax at the 1099-Misc screen) .  Then enter a line 8 deduction, for the same amount.  In TurboTax (TT), enter at:
    - Federal Taxes tab
     - Wages & Income
    Scroll down to:
    -Less Common Income
          -Misc Income, 1099-A, 1099-C
           - On the next screen, choose – Other reportable income -  Answer yes to Any other Taxable Income -On the next screen, Enter the number with a minus sign (-) in front.  Briefly explain at description.
  5. Do nothing and hope you can explain it away when & if the IRS contacts you