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Research stipend plus Room and Board grant - how to account for on student's tax return?

Forum|Forum|4 years ago
April 8, 2022
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Our son, who we claim as a dependent, received a 1099MISC form from his college for a $6100 stipend for summer research he did. And on his 1098-T the college added $3500 in Box 5(scholarship or grants) that they provided from a scholarship fund(trust)for room and board for him during the summer. During the school year he earned about $1300 for tutoring for which he received a W-2. I am confused how he should declare these amounts on his tax return.

Best answer by Hal_Al

Technically, he doesn't need to file a tax return as 6100 +3500 + 1300 = less than the $12,550 filing requirement.

Unfortunately, income on a 1099-Misc may be red flagged by the IRS as unearned income, which means a lower filing threshold and smaller standard deduction (and actual tax). You could just not file and hope to explain it if you hear from the IRS. Filing may head off an IRS inquiry. But, there's still some risk, as the correct way to file does not put the income on the line, where the IRS expects a 1099-Misc to be reported.

The college should not have used a 1099-Misc. They shoulda added the stipend to box 5 of the 1098-T or used a W-2. That said, it's still common practice, and is handled as follows:

In TurboTax, do not enter at the 1099-Misc place. Instead, after entering the 1098-T, in the education interview, you will eventually reach a screen asking if he had any additional scholarships. It's there that you enter the $6100. That puts it on line 1 of form 1040 with the notation SCH to the left.

J

JillS56

Since you have the scholarship that covers your tuition from Form 1098-T, you will report your stipend amount under Other Reportable Income. Here are the steps:

In TurboTax online edition,

After signing into your account, select Pick up where you left off
To your left, select Federal
Scroll down to Less Common Income / Miscellaneous Income 1099-A, 1099-C, select Start
Next screen, scroll all the way down to Other Reportable Income, select Start to enter information
The next screen will allow you to report the income with a brief explanation.
Here I would enter research stipend income and the amount.

How to Enter My Stipend Income.

B

brommaboAuthor

Thank, but the scholarship for $3500 does not cover tuition, it covered room and board for the summer. The rest of the 1098-T has his qualified tuition expenses in Box 1 and his scholarship for the school year tuition in Box 5. The school added the $3500 for summer room and board(while he was doing the research) on top of the Box 5 amount if that makes sense. The $6100 1099MISC is for the research stipend. I should not enter that amount in the 1099-MISC field?

Hal_Al

Employee

Q. But the scholarship for $3500 does not cover tuition, it covered room and board for the summer.

A. The interview will ask how much of the scholarship was used for room and board. But, since the school classifies it as "scholarship", you are allowed to apply it to tuition, if you want to, to keep it from being taxable (not needed in your case). Be sure to "save" enough tuition to claim the tuition credit.

Q. The school added the $3500 for summer room and board(while he was doing the research) on top of the Box 5 amount if that makes sense.

A. Yes. That's common. All scholarship goes in box 5, not just the scholarship for tuition.

Q. The $6100 1099MISC is for the research stipend. I should not enter that amount in the 1099-MISC field?

A. Correct. Stipend income is earned income and you want it reported as such. TurboTax will enter a 1099-Misc as unearned income.

Hal_AlAnswer

Employee

Technically, he doesn't need to file a tax return as 6100 +3500 + 1300 = less than the $12,550 filing requirement.

Unfortunately, income on a 1099-Misc may be red flagged by the IRS as unearned income, which means a lower filing threshold and smaller standard deduction (and actual tax). You could just not file and hope to explain it if you hear from the IRS. Filing may head off an IRS inquiry. But, there's still some risk, as the correct way to file does not put the income on the line, where the IRS expects a 1099-Misc to be reported.

The college should not have used a 1099-Misc. They shoulda added the stipend to box 5 of the 1098-T or used a W-2. That said, it's still common practice, and is handled as follows:

In TurboTax, do not enter at the 1099-Misc place. Instead, after entering the 1098-T, in the education interview, you will eventually reach a screen asking if he had any additional scholarships. It's there that you enter the $6100. That puts it on line 1 of form 1040 with the notation SCH to the left.

B

brommaboAuthor

Yes, I figured and worried about potential red flagging...And then the $3500 goes there too, since I entered it as going to room and board in the Education section out of the total of the amount in Box 5. That appears as SCH income.

Related question, on my husband's and my return we filled out the Education section to get the Amer Opportunity credit by deducting the $3500 from Box 5 in our return. Is that reasonable?

B

brommaboAuthor

When I changed my son's return to entering the $6100 stipend as scholarship in the Education section, his tax liability went to 0. However, his income shows as 8998 and deductions as 9332. Can he still do an Roth IRA for 2021 even though his tax liability is 0?