My son has 18k in internship stipends. He got form 1099 NEC. How to report to avoid self employment tax

Forum|Forum|1 year ago
April 12, 2024
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My son has 18k in internship stipends with Form 1099 NEC. If I enter it as 1099 NEC it will be subject to self employment tax. I also tried to enter it as "other reportable income", then it is treated as unearned income and taxed on my rate (much higher). Can I report the amount on "other income not already reported on a Form W-2 or Form 1099"? I think that is the way for scholarships/fellowships. Not sure if it also applies to student internship stipends.

AmyC

Employee

Since it came on a 1099-NEC, let's enter it there without the self-employment tax. Follow these steps:

Edit your form
Continue to any uncommon situations?
Select this was not money earned as an employee or self employed

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taxquestions18Author

Thanks! I tried as you suggested, and the income showed up on Line 8 of 1040. However the standard deduction is only $1250. Why is that?

taxquestions18Author

Also to add: When I say it is not SE income, it treated the income as unearned, and the tax rate is very high. Is there a way to claim it as earned income?

Hal_Al

Employee

@taxquestions18 Are you using TurboTax online or download software? The entry method, for stipend income, can be different for each type.

taxquestions18Author

I am using the software version

Hal_Al

Employee

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)

- Wages & Income

“I’ll choose what I work on” Button

Scroll down to:

-Less Common Income

-Click "Visit All". You'll eventually reach a screen to enter the scholarship (stipend) amount. Note: you MUST use the "visit all" button to get the scholarship screen

It will go on line 8r of Schedule 1 (new place starting in 2022) and be treated as earned income for calculation of the standard deduction.

That said, you should consider the facts in determining whether this income a "stipend" rather than contract wages or self employment.